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January 15, 2009

Credit Cardholders' Bill of Rights Reintroduced in House

Demos Calls for Swift Enactment of Protections for Besieged Credit Card Customers

Washington, DC--Today, Congresswoman Carolyn B. Maloney (D-NY), Chair of the House Financial Institutions and Consumer Credit Subcommittee, and Senator Charles E. Schumer (D-NY), a member of the Senate Banking Committee, today reintroduced the Credit Cardholders' Bill of Rights Act in the House and Senate respectively. The legislation would outlaw several abusive lending practices in the credit card market. Tamara Draut, Vice President for Policy and Programs at Demos, a non partisan policy center that supports legislative measures to re-regulate the credit card industry and bolster the houshold economy, issued the following statement on the legislation:

"This bill couldn't come at a better or more dire time for America's households. As the financial sector continues to reap the consequences of the subprime debacle, banks are openly increasing interest rates and fees on their credit card customers in order to cover losses in other areas. The only reason this is possible is because in the absence of almost any regulation, issuers have tilted the playing field heavily in their favor.

"The Credit Cardholders' Bill of Rights Act would level the playing field between borrower and lender by putting an end to some of the most arbitrary, abusive, and unfair credit card lending practices that trap consumers-particularly disadvantaged and minority borrowers-in an unending cycle of costly debt. The bill would:

--End arbitrary and unfair interest rate increases on existing balances,
--Prevent credit card companies from gaming consumer payments,
--Prohibit unfair and hidden interest rate charges on balances repaid during the grace period, and
--End unfair late fees for on-time payments.

"Demos research shows that inequitable credit card underwriting practices have shifted the cost of credit to individuals least able to afford it, while at the same time generating some of the highest profits in the entire banking sector. Low-income families and households of color, primarily African Americans and Latinos, bear the brunt of the cost of credit card deregulation through excessive fees and high interest rates.

"This measure, known as H.R. 5244 in the 110th Congress, was passed overwhelmingly by the House of Representatives in September 2008 with bipartisan support-a vote of 312 to 112, with 84 Republicans joining Democrats in supporting the bill. Unfortunately, the Senate did not have time to take up the bill before the end of the legislative session. Although the Federal Reserve and other bank regulators issued a rule in December 2008 that would prohibit many of the same unfair practices, the rule does not take effect until July 2010, giving credit card companies 18 months to proceed unchecked and delaying relief for millions of American consumers. The legislation introduced today would take effect 90 days after enactment, establishing important protections in the midst of the worsening economic crisis.

"Now that our regulating agencies have acknowledged that credit card issuers need to be brought back into line, it is up to Congress to stand up for beleaguered consumers. We look forward to working with members of the House and the Senate to speed relief to millions of Americans struggling to stay afloat in the midst of recession."

The Credit Cardholder Bill of Rights Act has 42 original cosponsors in the House, including Rep. Barney Frank (D-MA), Chair of the House Financial Services Committee. The Senate bill is cosponsored by Sen. Mark Udall (D-CO). Dozens of consumer, civil rights, small business, community and labor organizations have issued their support for the measure.

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