CREDIT CARD RIGHTS | Obama Supports a Bill

Barack Obama told a round table meeting with local residents in Des Moines, Iowa on December 3, 2007 that he supports a Credit Card Bill of Rights that would:

1. Prevent credit card companies from raising interest rates without giving consumers the option to opt out of the agreement.
2. Ban rate changes to past debt so that rate increases only apply to future debt.
3. Prevent credit card companies from charging interest on transaction fees.

As President, he will implement such a plan, he said:

Our middle class families are not going to be secure so long as they can’t get out of debt. If we’re serious about stopping Americans from falling deeper into debt, we’ve got to crack down on the predatory credit card companies that are pushing them over the edge. Many credit card companies today are tricking Americans into agreements they can’t afford because that’s how they make big profits. Well, no company’s bottom line should come before what’s right for the American people. And we’ve got to stop these kinds of deceptive practices to help strengthen our middle class families and make sure that credit cards don’t become the next subprime crisis. 

Every American has a responsibility to pay what they owe, but we need to make sure that what they’re paying is fair. And we’ve got to do more for those Americans who aren’t able to climb out of debt and actually have to declare bankruptcy. That’s why I voted against a bankruptcy bill in 2005 that protects credit card companies and banks, while preventing middle class Americans from getting back on their feet after a crisis – even if they’ve suffered an illness. And that’s why as President, I’ll reform our bankruptcy laws so we can make sure Washington works for working Americans.

There's a bill just like that introduced by Rep. Carolyn Maloney.

Postscript

The bill was passed and signed in 2009.

Credit Slips Blog Supports Credit Cardholders Bill of Rights

Adam Levitin of the blog site Credit Slips has posted a blog on the Credit Cardholders Bill of Rights. Credit Slips is a joint site based at the University of Illinois of academics (the others are from Georgetown, Harvard, Iowa, Michigan, Ohio) who are concerned about credit and bankruptcy issues.

Levitin favors the bill, although he says it has some omissions -
"it doesn’t deal with problems of price structure, rewards programs, antitrust, merchant fees, or identity theft prevention". He also observes that even with the bill, "the card industry might well find other ways to extract rents from unwitting cardholders even if the ways enumerated in the bill are shut down."

With these minor reservations, Credit Slips concludes that the bill is "an important first step to reining in an industry that has run wild in a regulatory no-man’s land of outdated and threadbare federal laws, preempted state laws, and somnolent consumer protection by federal banking regulators."

This is a nice piece of writing as well as being an accessible primer on the ways that consumers have been hoodwinked on a grand scale by the ploys and practices of some credit card issuers.

MALONEY | Credit Cardholders Bill of Rights

New York Representative Carolyn Maloney, who serves as Vice Chair of the Joint Economic Committee (Senator Chuck Schumer is Chair), has performed a public service by introducing the Credit Cardholders Bill of Rights, H.R. 5244. She describes her bill as "comprehensive credit card reform legislation" that ends "abuses that unfairly hurt consumers".

Comprehensive it does seem to be, and reasonable. The bill prohibits "arbitrary interest rate increases", requires a notice of any interest rate increase at least 45 days in advance, reserves to cardholders their right to pay off their existing balance at the current interest rate if the rate is increased, requires that cardholders who pay on time will not be "unfairly penalized", prohibits "due date gimmicks" and "misleading terms", allows cardholders to set their own limits on their credit, requires that credits and payments be posted "promptly and fairly", prohibits imposing "excessive fees" on cardholders and prohibits issuing subprime credit cards to people who can't afford them.

If you agree, click here to Support the Credit Cardholders Bill of Rights.

Predatory Credit Card Issuers?

Who's at fault for the high level of credit card debt and the high fees that are being charged? The credit card issuers, who make it so easy to borrow, or we American consumers who run up five and six-figure credit card bills we can't afford, until the credit stops?

A blog posted on the Motley Fool web site says that both are at fault. Americans borrow too much, it is made too easy for them, and the implications of their borrowing are not fully understood.

This is a broader perspective on the subprime loan crisis. The predatory subprime lenders focused on housing-secured loans. Predatory credit-card issuers make up in high fees what they may lose in credit-card debt that is not repaid.

What do you think?