Credit Cardholders: Help is on the Way
On May 22, 2009, President Obama passed the Credit Cardholders' Bill of Rights. This landmark measure received bipartisan support in both chambers and will make issuers state costs more clearly and end many arbitrary abuses. The bill takes full effect February 2010 – a few months sooner than the Federal Reserve rules, which do not become effective until July 2010.
Once the bill is effective, cardholders should experience a more consumer-friendly marketplace when the credit card industry plays by sensible and fairer rules.
The Credit Cardholders' Bill of Rights will help borrowers by:
- Restricting issuers' ability to raise rates on existing balances.
- Requiring 45 days notice before hiking interest rates on new balances.
- Requiring that payment amounts above the minimum payment be applied to the highest interest rate balances first.
- Allowing over-the-limit fees only when a borrower affirmatively consents to having over-the-limit transactions approved.
- Requiring that fees be reasonable and proportional to the violation of terms.
- Prohibiting issuers from charging consumers a fee for paying a bill by telephone or over the Internet.
- Requiring credit card statements to be mailed 21 days before the bill is due rather than the current 14 days.
The new law does not restrict the level of interest rates or the size of the rate increases that are allowed. There is no provision to address the industry practice of reducing credit limits at any time for any reason, or the continued insertion of forced arbitration clauses (that prevent a borrower's dispute being heard by a jury in court) in almost every credit card agreement.
American credit cardholders are vital to this country's recovery, so these protections must be implemented as soon as possible. Families rely on credit cards to help pay health care expenses among other bills, buy groceries and make ends meet in this troubled economy. Allowing unfair credit card industry practices to go unchecked would have a harmful effect, just as toxic mortgage lending practices have done.