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Udall bill protects people from credit abuse

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Contributed by: Lawrence Pacheco on 3/16/2007

U.S. Reps. Mark Udall (D-CO) and Emanuel Cleaver (D-MO) have introduced legislation to protect consumers from banks and other credit card issuers who now can increase interest rates without notice, assess excessive or unjustified fees, and target minors.

H.R. 1461, the Credit Card Accountability, Responsibility and Disclosure Act of 2007, would end credit card practices such as universal default, where card issuers impose a higher interest rate on a credit card account if there has been any change in the cardholder's credit history - even if the change is unrelated to the credit card account, such as paying being late on a car or utility payment, carrying too much debt overall, or having too much available credit. The bill also requires greater disclosure to consumers about interest rate hikes and fees, and would enact new requirements for issuing credit cards to minors.

"For many Americans, consumer credit is more than a convenience. It is something that many people need to use to pay for their everyday needs. For them, it is a necessity. Unfortunately, the credit card industry's fine print and confusing language has allowed them to increase interest rates at will for any reason and assess compounding late fees that have left consumers under a towering pile of debt. Congress should do more to promote responsibility by those who provide the credit. Credit shouldn't be free, but consumers should be treated fairly," said Udall.

The bill requires that a credit card company provide advance notice of any interest rate increase unless it results from the expiration of an introductory rate for new accounts or a change in another rate to which the credit card rate is indexed. The bill gives the consumer the right to avoid paying the higher rate by canceling the card before the new rate takes effect and any remaining amounts owed on that card would be subject to the terms and conditions that applied at the time of cancellation.

Additionally, the bill requires that card holders be given clear notice of any fees, other charges, or increases in interest rates that would result from late payments. It bars charging fees or other penalties because a card holder pays more than the monthly minimum or pays in full an existing account balance or because a card holder does not use the card during some particular period of time. The bill also prohibits imposing a fee if a card holder goes over the total credit authorized on a card if the card issuer has authorized that charge either in advance or at the time of a purchase.

Finally, under the bill people under 18 who apply for a credit card would need one of three things: the signature of a parent or guardian willing to take responsibility for the applicant's debts; information indicating that the applicant has some other means of repaying any debt; or a certification that the applicant has completed a credit counseling course by a qualified nonprofit budget and credit counseling agency.

Udall said that the easy availability of credit cards, combined with changes in banking and finance laws that give credit card companies more power over consumers, has led to unfair and abusive situations and it is time for Congress to act.

"No one excuses a deadbeat, but consumers who pay their bills on time are often victimized by suddenly escalating and exorbitant interest charges. Credit card companies also encourage debt by issuing credit cards to young consumers in order to lure them into long-term obligations. The Credit CARD Act takes some simple, common-sense steps to stop abusive practices, educate cardholders, and stiffen the penalties for violations. With so many American families using and depending upon credit, I believe the rules that govern credit cards should reward responsible behavior by consumers and require the same from credit card issuers," said Udall.

The bill has been referred to the House Financial Services Committee. Rep. Cleaver is a member of that committee.

Lawrence Pacheco is Udall's Press Secretary.

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