06/06/2009 05:12 am ET Updated May 25, 2011

Moving Ahead on Reforming the Credit Card Industry

This past Saturday, Demos along with the Neighborhood Economic Development Advocacy Project (NEDAP), New Yorkers for Responsible Lending (NYRL) and Consumer Union joined Congresswoman Maloney (D-NY) and U.S. Senator Schumer (D-NY) in encouraging the U.S. Senate to continue the quick and steady passage of the Credit Cardholders Bill of Rights Act, which passed the House of Representative last week with a 357-70 vote.

The bill, introduced by Congresswoman Maloney, could not have come at a better time for American families. Over the last 20 years, American families have been using their credit cards as a plastic safety net driven by stagnant incomes and increased costs of living. The level of credit card debt held by Americans has increased by over 350%, to nearly one trillion dollars. Demos research shows that these are families, across the middle and lower income spectrum, are living on the financial edge: they are using their cards to make ends meet, to pay for things like groceries and gas, heating and telephone bills, even college tuition and, increasingly, medical expenses.

It is no coincidence that, during the same period that credit balances skyrocketed, credit card issuers had taken advantage of financial deregulation to introduce new usurious fees, penalties and interest rates--and a host of gotcha tactics--that have directly contributed to exploding balances. Low-income families and households of color, primarily African Americans and Latinos, have borne the brunt of the high cost of credit which deregulation has unleashed. And thanks to innovative underwriting practices over the past decade, the cost of lending has steadily passed onto consumers, resulting in mind blowing profits--nearly $30 billion last year--at a time when Americans are struggling to make ends meet.

The legislation passed last week in the U.S. House couldn't have come too soon. If the credit card industry is allowed to conduct business as usual, families who are already bearing the brunt of the fallout of the financial crisis, would plunge deeper into a financial abyss. The U.S. Senate should quickly take up and pass the Credit Cardholders Bill of Rights (or move on The Credit Card Accountability, Responsibility and Disclosure Act, a measure introduced by Senator Dodd (D-CT) in February) to ensure that consumers are protected from the usurious practices that threaten to further undermine the economic security of American families.