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(Washington D.C.)- The House of Representatives today passed legislation to prevent credit card companies from instituting unfair practices by moving forward the effective date for previously passed reforms. Congressman Levin is an original co-sponsor of the legislation, which passed by a vote of 331 to 92.
“Earlier this year Congress passed landmark credit card reform legislation to put an end to the unfair and abusive credit card practices that outrage so many families across Michigan,” said Rep. Levin. “Some of the reforms were set to take effect early next year, but the credit card companies have used the time since the bill was signed to impose new rate increases and make other detrimental changes. The legislation passed today will move up the effective date to prevent further abuse.”
In the first half of the year, interest rates climbed an average of 20 percent on credit cards representing more than 90 percent of outstanding balances, according to Pew Charitable Trusts. Congressman Levin’s office received numerous complaints from constituents who have experienced rate increases and other unexpected changes to card member agreements, in some cases on credit card accounts that do not even have an existing balance.
Andrea Nelson, a resident of Ferndale, received notice of a rate hike on her credit card not long after the credit card reform legislation was signed into law. “I couldn’t believe that my rate would shoot up like that,” said Ms. Nelson. “I cancelled that card, but just paying off the balance while also paying tuition and the rest of my living expenses has been a tremendous strain. Credit card companies just shouldn’t be able to treat people like that.”
Under the previously passed legislation, reforms were implemented at three different dates to allow credit card companies time to prepare for the changes. The Expedited Card Reform for Consumers Act, H.R. 3639, will move the nine-month (February 22, 2010) and 15-month (August 22, 2010) implementation dates up to the date H.R. 3639 is signed by the President. These reforms include an end to arbitrary rate increases, excessive “over-the-limit” fees, and the deceptive practice of applying payments to balances at the lowest rates first. Additionally, the prohibition on issuing cards to vulnerable minors without a cosigner is moved forward.
More information on new credit card reforms:
The following requirements became effective on August 20, 2009:
• Provide increased written notice to consumers of any increases in the interest rate or other significant changes to the terms of a credit card account
• Inform consumers of their right to cancel the card before the rate hike goes into effect
• Send statements to consumers 21 days before the due date of any payments
The following provisions were originally set to become effective on February 22,
2010, but would be moved forward under this legislation:
• Prohibits arbitrary interest rate increases and universal default on existing balances
• Prohibits issuers from charging over-limit fees unless the cardholder elects to allow the issuer to complete over-limit transactions, and also limits over-limit fees on electing cardholders
• Requires payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest
• Prohibits issuers from setting early morning deadlines for credit card payments
• Prohibits interest charges on debt paid on time (doublecycle billing ban)
• 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
• Protects recipients of gift cards by requiring all gift cards to have at least a five-year life span, and eliminates the practice of declining values and hidden fees for those cards not
used within a reasonable period of time
The following provisions were originally set to become effective on August 22,
2010, but would be moved forward under this legislation:
• Requires penalty fees to be reasonable and proportional to the omission or violation
• Requires that creditors periodically review all interest rate increases since January 2009 and reduce rates when a review indicates that a reduction is warranted.
• Amends the Electronic Fund Transfer Act to limit dormancy, inactivity, and service fees associated with gift cards.
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