WASHINGTON - Lawmakers called last week for reforms to credit card rules and disclosures and to bar to some of the most controversial credit card issuer practices that change the terms of a loan after the issuance of credit.
“The practices of the credit card industry, in some ways, may be more troubling than that in the subprime market,” said Rep. Maxine Waters, D-Calif., one of 82 House sponsors of The Credit Cardholders’ Bill of Rights during a hearing before the House Financial Services Committee, adding, “it is not at all clear to consumers how and when their interest rates are going to increase.”
Among the practices the bill would bar are so-called universal default, which allows card companies to raise rates when a cardholder had defaulted on a debt with another debtor; double-cycle billing; “any-time, any-reason repricing”; and from charging late fees when a cardholder presents proof of mailing his/her bill within seven days of the due date.
It would also require 45 days notice of any interest rate hikes; give cardholders the right to cancel their card and pay off existing balance at the existing rate when rates go up; require card companies mail bills 25 calendar days before the due date (up from the current 14 days).
“In short,” said Rep. Carolyn Maloney, the New York Democrat who drafted the bill, “the bill requires the responsibility of credit card companies to stick to the deal that cardholders agreed to.”
Rep. Barney Frank, the chairman of the Financial Services Committee, denounced practices such as universal default as violating the principal of retroactively. “Retroactivity is a bad idea,” said Frank, one of the co-sponsors of the credit card bill.
Frank called on the credit card issuers to work with Congress on the reform effort. “I urge you to cooperate with us,” said the Massachusetts Democrat. “We’re not setting rates.”
The CU lobby is opposing the bill because of the new restrictions and added disclosures–even though they argue that few credit unions engage in the controversial practices the bill would prohibit.
While the issue appeared last week to have some momentum, especially after a companion bill was introduced in the Senate, it is likely that Congress will wait to act on the bill until the Federal Reserve has completed its own amendment to Reg Z, the Truth In Lending Act, to include some of the same reforms called for in the House bill.
Rep. Judy Biggert, (R-IL) said she favors many of the reforms in the bill but would reserve judgment until the Fed has weighed in with its own reforms.
A delay in action will mean that this issue, like other pro-consumer bills, such as new restraints on overdraft protection and credit card interchange fees, will be pushed ahead to the next Congress when the Democrats who have championed these issues are expected to hold a greater margin.
The Fed’s action is not likely to happen until later this year or early next year, long after the Congress had adjourned, pushing the issue to the Congress.
