FOR IMMEDIATE RELEASE    
Monday, February 22, 2010

CONTACT: Cullen Schwarz
Office: (202) 225-5802

Peters’ Amendment Allowing Consumer to Pay Off Debt with Higher Interest Rates First among Provisions Taking Effect Today

Washington, D.C. – American consumers and small businesses who use credit cards will now enjoy more rights and greater protections from abuse, as major legislation restricting unfair rate hikes and other egregious credit card company practices take effect today. The Credit Card Accountability Responsibility and Disclosure Act of 2009 (the “CARD Act”, also known as the “Credit Cardholder’s Bill of Rights”, H.R. 627) includes a provision authored by Congressman Gary Peters and passed as an amendment to the bill.  Peters’ provision requires that companies allow consumers to pay off cards with the highest interest rates first, rather than companies dictating that consumers pay off lower interest principal, as they were before today.

“In my 22 years helping families with financial planning, a basic piece of advice would be to pay off debt with the highest interest rate first.  But credit card companies were forcing people to do just the opposite,” said Congressman Peters, a member of the Financial Services Committee.  “People should have the right to pay off debt in whatever order they want, and my amendment allows them to do that.”

The Credit Cardholder’s Bill of Rights was signed into law on May 22, 2009.  Congressman Peters was among a handful of legislators invited to the signing because of his contributions in shaping the bill.  The bill is supported by Consumers Union and the Consumer Federation of America.

“One of the reasons families have such high debt levels is that credit card companies were engaged in egregiously unfair tactics that saddle families with underserved debt,” Congressman Peters said.  “As of today, families have more rights.  The common sense reforms in this bill will protect consumers and require that card companies are upfront with cardholders about fees and interest rates.  These protections for families and small businesses were long overdue.”


Before the bills’ enactment, Congressman Gary Peters met with Oakland County residents last year to highlight the need for the Credit Cardholders’ Bill of Rights.  In 2008, credit-card issuers imposed nearly $20 billion in late fees, over-limit charges, and other penalties—many of which were applied arbitrarily to consumers paying their balances on time.  Local residents spoke to Congressman Peters about problems they have had with credit card companies treating them unfairly (e.g., one woman saw her rate raised from 6% to 44% without notice even though she never missed a payment).  Contact information for event participants available upon request. 

Provisions of the CARD Act taking effect today include:

• Payments in excess of the minimum must be applied to the credit card balance with the highest rate of interest first (Congressman Peters’ amendment). 
• Interest rate hikes on existing balances are prohibited.
• Penalty rate increases for payments less than 60 days overdue are banned (and rates must be returned to original levels if payments are made on time for six months). 
• Interest charges on debt paid on time (“double-cycle billing”) is banned.
•  “Due-date” gimmicks such as setting early morning times for payments, before mail is delivered or charging fees for paying a bill by phone or internet is banned—payments received by 5 p.m. of stated due date must be considered on time.
• Promotional rates must last at least six months.
• Consumers under 21 must demonstrate an ability to pay or have a parent cosign to be eligible for a credit card.

Some provisions of the CARD Act took effect August 20, 2009:

• Companies must provide notice of any rate hike or change 45 days in advance.
• 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.

Consumers Union and the Consumer Federation of America Support the CARD Act.  Contact information for a representative from each organization:

Pamela Banks, Consumers Union:  (202) 462-6262; bankpa@consumer.org

Travis Plunkett, Consumer Federation of America:  (202) 387-6121; TPlunkett@consumerfed.org