Credit Card Policy Recommendations

Address larger economic issues that contribute to heavy credit card debt. Despite the common perception that families use credit cards to "live beyond their means," our research has demonstrated that a sizeable majority of low- and middle-income families depend on credit cards to pay for basic living expenses or to deal with unexpected financial emergencies.

1. Promote increased savings, not increased debt, to meet unexpected financial emergencies.
2. Support policies for adequate wages, and affordable health insurance and unemployment insurance.

Restore responsible credit practices. Deregulation of the credit card industry has created an environment where credit card companies can construct the terms, rules, and practices of the credit card agreement without meaningful regulation. These new and complicated revenue-generating practices often fall harshly on the backs of those consumers who can least afford them.

1. Eliminate rate or fee increases triggered by unrelated transactions.
2. Limit rate increases to a maximum of 50 percent above the account's original rate (e.g., from 12% to 18%).
3. Require advance notice of at least 30 days before imposing a rate or fee penalty.
4. Honor the original terms of the credit card agreement until proper notice is given, and only apply new terms to new transactions.
5. Disclose the cost of minimum payments, and make minimum payments high enough to avoid negative amortization.
6. Ban mandatory arbitration clauses.
7. Establish and apply meaningful underwriting standards.