Senators Introduce Bill to Stop Unfair Credit Card Practices
On Tuesday, two senators, Carl Levin and Claire McCaskill, introduced the Stop Unfair Practices in Credit Cards Act to take action to protect consumers against some of the punitive practices of credit card companies. This bill is the result of months of studies, hearings and examinations.
"These would be very good changes for the consumer. If passed, this Act would end some extremely unfair and punitive practices that have been in place in the credit card industry for years that severely hurt consumers," says Bill Hardekopf, CEO of LowCards.com. "The credit card industry has received a tremendous amount of attention since the credit card practices study was released last fall by the Government Accountability Office. These Senators have outlined good changes that will protect consumers, but still allow credit card companies to make money on the loan, not on all of the fees and unfair practices currently in existence."
Here are some of the changes suggested in the bill:
* No interest charges for debt paid on time-- This ends the practice of charging interest on any portion of debt paid on time during a grace period. Currently, if the card holder pays less than one hundred percent of the monthly bill, even if the card holder pays on time, he or she could be charged interest on the entire billed amount, including the portion that was paid by the specified due date.
* Unfair unilateral rate hikes--Prohibits issuers from raising rates without the card holder's
written consent. Penalty hikes would be limited to no more than a 7% increase.
* Apply rate increases only to future debt--This will stop the practice of retroactively
applying the rate increase to the previously incurred debt; the rate increase will only apply to the debt added after the increase. Earlier debt would continue to accrue interest at the rate previously in effect.
* No interest charges on fees--Fee income now produces about 10 percent of all income obtained by credit card issuers. The bill would prohibit credit card issuers from charging or collecting interest on the fees imposed on consumers, such as late fees and over the limit fees.
* Over the limit fee restrictions--Stops the charging of multiple fees for a single instance of
exceeding the limit. Charges the fee only when the action, not a fee from the issuer, causes the limit to be exceeded.
* Pay-to-pay fees--Drops the $5-$15 payment fees charged by making a payment by telephone or electronic transfer.
* Fair treatment of cardholder payments--Switches the way payments are applied to balances so that the payment is applied first to the balance bearing the highest interest rate, and then to each successive balance bearing the next highest rate, until the payment is used up. Issuers would also be required to apply payments in the most effective way to minimize fees and interest charges that may be incurred.
"These would be very good changes for the consumer. If passed, this Act would end some extremely unfair and punitive practices that have been in place in the credit card industry for years that severely hurt consumers," says Bill Hardekopf, CEO of LowCards.com. "The credit card industry has received a tremendous amount of attention since the credit card practices study was released last fall by the Government Accountability Office. These Senators have outlined good changes that will protect consumers, but still allow credit card companies to make money on the loan, not on all of the fees and unfair practices currently in existence."
Here are some of the changes suggested in the bill:
* No interest charges for debt paid on time-- This ends the practice of charging interest on any portion of debt paid on time during a grace period. Currently, if the card holder pays less than one hundred percent of the monthly bill, even if the card holder pays on time, he or she could be charged interest on the entire billed amount, including the portion that was paid by the specified due date.
* Unfair unilateral rate hikes--Prohibits issuers from raising rates without the card holder's
written consent. Penalty hikes would be limited to no more than a 7% increase.
* Apply rate increases only to future debt--This will stop the practice of retroactively
applying the rate increase to the previously incurred debt; the rate increase will only apply to the debt added after the increase. Earlier debt would continue to accrue interest at the rate previously in effect.
* No interest charges on fees--Fee income now produces about 10 percent of all income obtained by credit card issuers. The bill would prohibit credit card issuers from charging or collecting interest on the fees imposed on consumers, such as late fees and over the limit fees.
* Over the limit fee restrictions--Stops the charging of multiple fees for a single instance of
exceeding the limit. Charges the fee only when the action, not a fee from the issuer, causes the limit to be exceeded.
* Pay-to-pay fees--Drops the $5-$15 payment fees charged by making a payment by telephone or electronic transfer.
* Fair treatment of cardholder payments--Switches the way payments are applied to balances so that the payment is applied first to the balance bearing the highest interest rate, and then to each successive balance bearing the next highest rate, until the payment is used up. Issuers would also be required to apply payments in the most effective way to minimize fees and interest charges that may be incurred.
Posted by Lynn at
9:13 PM
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