When managed responsibly, credit cards are both useful and convenient for millions of consumers on a daily basis. However, according to the Federal Reserve, outstanding U.S. consumer credit card debt was at nearly $1 trillion by the close of 2006. Moreover, the Better Business Bureau (BBB) system logged more than 6,700 complaints last year about credit cards and the various plans marketed to consumers.
It’s no wonder that lawmakers are interested in credit cards and debt, and the BBB wants you to know what potential new legislation might mean for your wallet.
Credit Card Accountability, Responsibility and Disclosure [CARD] Act of 2007
This bill was introduced in March of 2007 by Representatives Mark Udall (D-CO) and Emanuel Cleaver (D-MO) as an amendment to the Consumer Credit Protection Act. This bill is still in committee and includes provisions that would:
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Require credit card companies to give a 15-day advance notice of changes to card policies including adjustments to fees and interest rates;
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Prohibit credit card companies from increasing an individual’s interest rate if their credit score is marred due to other financial obligations;
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Forbid credit card companies from issuing cards to minors without parental consent; and;
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Restrict credit card companies from charging consumers fees for paying more than the minimum monthly balance or for paying the credit card balance in full.
If you would like to voice support for or opposition to this bill you can write to your congressional representative via www.house.gov/writerep.
Stop Unfair Practices in Credit Cards Act of 2007
This bill, also still in committee, was introduced in May of 2007 by Senators Claire McCaskill (D-MO) and Carl Levin (D-MI) as an amendment to the Truth in Lending Act and includes provisions that would:
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Stop credit card companies from charging interest on debt that is paid on time;
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Crack down on fees, including repeated late fees, over-the-limit fees, as well as fees to pay your bill and prohibit interest charges on fees;
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Establish guidelines on interest rate increases, including a cap on penalty interest rate hikes at no more than seven percent; and;
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Require that increased interest rates apply only to future credit card debt, and not to debt already incurred.
If you would like to contact your Senators urging them to support or oppose this bill, you can go to www.senate.gov for a directory of e-mail addresses, mail addresses, and office phone numbers.
Regulation Z (Truth in Lending)
Unlike proposals from the House and Senate—which focus mainly on limiting the actions of credit card companies—the Federal Reserve has made recommendations that focus on consumer education and would require that credit card companies provide:
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Forty-five days instead of 15 days notice of any changes in rates and terms;
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Clearer statements with larger print and explanations of complicated terms such as "effective APR" and “fixed rate” ;
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Disclosure of the impact of making only minimum payments;
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Disclosure of how much interest is charged for different types of transactions, such as purchases versus cash advances;
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Separate totals of fees and interest for the month and year-to-date; and;
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A summary table of fees and penalties in solicitations and on applications.
The recommendations by the Federal Reserve Board are up for public comment on their Web site until mid-October:www.federalreserve.gov.
Whether you support or oppose any of the potential legislation on credit issues mentioned here, the BBB encourages all consumers to manage credit responsibly.
For more information and objective advice on consumer credit issues, go to www.bbb.org.
