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Klobuchar Backs Bipartisan Credit Card Reform Bill to Protect Consumers and Ensure Personal Responsibility

Sponsors legislation that will level the playing field for consumers by ending unfair practices

May 19, 2009

Washington, D.C. – Today bipartisan comprehensive credit card reform legislation, cosponsored by U.S. Senator Amy Klobuchar, passed the Senate by a vote of 90-5.  The legislation will help end unfair credit card practices and now goes to conference with the House passed bill.

“This legislation will help put fairness and common sense back into credit cards,” said Klobuchar.  “This bill will help consumers by cracking down on abusive practices and work to restore the confidence we need in the credit markets to get the economy moving again.  Above all, it levels the playing field so that consumers can make sound financial decisions and save money in the tough economy.”
 
Earlier this year the Federal Reserve took the first step toward improving disclosures and ending unfair practices. The legislation passed today will help strengthen those rules and enact new protections by banning unfair rate increases, requiring plain sight and plain language disclosures and stronger protections for students and young people.

Major Provisions:

Prevents Unfair Increases in Interest Rates and Changes in Terms

• Prohibits arbitrary interest rate increases and universal default on existing balances;
• Prohibits credit card issuers from increasing rates on a cardholder in the first year after a credit card account is opened;
• Requires promotional rates to last at least 6 months.

Prohibits Exorbitant and Unnecessary Fees

• Prohibits issuers from charging a fee to pay a credit card debt, whether by mail, telephone, or electronic transfer, except for live services to make expedited payments;
• Prohibits issuers from charging over-limit fees unless the cardholder elects to allow the issuer to complete over-limit transactions;
• Requires penalty fees to be reasonable and proportional to the omission or violation.

Protects the Rights of Financially Responsible Credit Card Users

• Prohibits interest charges on debt paid on time (double-cycle billing ban);
• Prohibits late fees if the card issuer delayed crediting the payment.

                                                                                                                               
Provides Enhanced Disclosures of Card Terms and Conditions

• Requires cardholders to be given 45 days notice of fee changes
• Requires issuers to provide disclosures to consumers upon card renewal when the card terms have changed;
• Requires issuers to provide individual consumer account information and to disclose the period of time and total interest it will take to pay off the card balance if only minimum monthly payments are made;
• Requires full disclosure in billing statements of payment due dates and applicable late payment penalties. 

Strengthens Oversight of Credit Card Industry Practices

• Requires each credit card issuer to post its credit card agreements on the Internet, and provide those agreements to the Federal Reserve Board to post on its website;
• Requires the Federal Reserve Board to review the consumer credit card market, including the terms of credit card agreements and the practices of credit card issuers and the cost and availability of credit to consumers.

Ensures Adequate Safeguards for Young People

• Requires issuers extending credit to young consumers under the age of 21 to obtain an application that contains: the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt; or proof that the applicant has an independent means of repaying any credit extended;
• Limits prescreened offers of credit to young consumers;
• Prohibits increases in the credit limit on accounts where a parent, legal guardian, spouse or other individual is jointly liable unless the individual who is jointly liable approves the increase in writing.

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