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Credit Cardholders Bill of Rights & Wall Street Reform

This Congress has fought for the Middle Class.   We have cut taxes, with tax bills at their lowest in 60 years.  We have ended taxpayer-funded bailouts.  We made credit card reforms that crack down on excessive fees, unfair rate hikes, and arbitrary agreements hidden in the fine print.  Wall Street Reform create the first-ever agency to look out for consumers in our financial system and gives them more protection and information to make their own decisions than ever before required.

CREDIT CARDHOLDERS' BILL OF RIGHTS
In 2009, Congress passed and President Obama signed into law the Credit Cardholders' Bill of Rights (Credit CARD Act), to protect consumers and crack down on the abusive practices of the credit card industry -- such as excessive fees, unfair interest rate hikes, and arbitrary agreements.  On August 22, the last of the new credit card protections take effect - including the banning of unfair rate increases, abusive fees, and penalties and requiring credit card companies to reconsider the interest rate hikes they jammed in place before the new law took effect.

With new requirements to provide consumers with clear and plain-English disclosures, the Credit Cardholders' Bill of Rights will save some families thousands of dollars.  Consumers will know their rights and be able to make informed decisions about their household finances.  This legislation will ban unfair rate increases and forbid abusive fees and penalties.  Among a raft of new protections, the new law:

  • prohibits retroactive interest rate hikes on existing balances,
  • bans double-cycle billing (charging interest twice for balances paid on time), 
  • eliminates due-date gimmicks,
  • requires 45-days' advance notice of interest rate, fees, and finance charges hikes,
  • requires payments to be applied fairly to the highest interest rate balance first, and
  • strengthens credit card protections for young people.

Siding with Big Banks and the credit card industry over the middle class, House Republicans leaders voted NO.

These new credit card restrictions, along with overdraft limits recently instituted by the Federal Reserve, will save U.S. consumers at least $5 billion in fees this year alone at the largest U.S. retail banks and credit card companies. [USA Today, 5/17/10] 

A new report finds that 'While it's been less than a year since passage of the Credit CARD Act, the new law appears to be working for millions of Americans who have credit cards. The elimination of most of the 'unfair' or 'deceptive' practices of the credit industry since we last surveyed the marketplace marks a major milestone in the move to make credit cards safer, transparent and more fair for consumers.' [Pew Charitable Trust]

WALL STREET REFORM 

The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act builds on the consumer protections of the Credit Cardholders Bill of Rights.  While many have focused on the impact on Wall Street, the new law has clear benefits for America's families and small businesses.  The Act:

  • Establishes a new independent watchdog agency that is able to act fast to:
    • ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, student loans, payday loans and other financial products, and
    • protect them from hidden fees, abusive terms, and from unfair and deceptive practices.
  • Creates a national consumer complaint hotline so consumers will have, for the first time, a single toll-free number to report problems with financial products and services.
  • Allows consumers free access to their credit score if their score negatively affects them in a financial transaction or a hiring decision. Gives consumers access to credit score disclosures as part of an adverse action and risk-based pricing notice.
  • Reforms mortgage lending, eliminating many of the hidden fees and abusive practices that trapped so many families with loans they could not afford to repay, and that resulted in record foreclosures. 
    • Lenders must disclose the maximum a consumer could pay on a variable rate mortgage, with a warning that payments will vary based on interest rate changes.
    • Prohibits unfair lending practices, such as pre-payment penalties and financial incentives for subprime loans that encourage lenders to steer borrowers into more costly loans.
    • Establishes a simple federal standard for all home loans: institutions must ensure that borrowers can repay the mortgages they are issued.
  • Reforms debit card transaction fees, potentially saving American small businesses billions of dollars each year.
  • Ends taxpayer-funded bailouts.

Siding with the special interests, Republicans strongly opposed the new Consumer Financial Protection Bureau, as well as provisions ending taxpayer bailouts of Wall Street in the new law.

Specifics of the Credit Cardholders' Bill of Rights (CARD) Act
Prevents Unfair Increases in Interest Rates and Changes in Terms

  • Prohibits arbitrary interest rate increases on existing balances, unless the consumer is 60-days late on a payment or fails to comply with a workout agreement.
  • Eliminates “universal default,” where card issuers raise interest rates because of lateness or default with other creditors -- even if the cardholder is in good standing with the card in question;
  • Requires a credit card issuer who increases a cardholder's interest rate to periodically review and decrease the rate if indicated by the review;
  • Prohibits issuers from increasing rates on a cardholder in the first year a credit card account is opened;
  • Requires promotional rates to last at least 6 months.

Prohibits Exorbitant and Unnecessary Fees

  • Prohibits issuers from charging a fee to pay a credit card debt, whether by mail, telephone, or electronic transfer, except for live services to make expedited payments;
  • Prohibits issuers from charging over-the-limit fees unless the cardholder elects to allow the issuer to complete over-the-limit transactions, and also limits over-the-limit fees on electing cardholders;
  • Requires penalty fees to be reasonable and proportional to the omission or violation;
  • Strengthens protections against excessive fees on low-credit, high-fee credit cards.

Requires Fairness in Application and Timing of Card Payments

  • Requires payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest;
  • Prohibits issuers from setting early-morning deadlines for credit card payments;
  • Requires credit card statements to be mailed 21 days before the bill is due rather than 14 days required before the law was enacted.

Protects the Rights of Financially Responsible Credit Card Users

  • Prohibits interest charges on debt paid on time (double-cycle billing ban);
  • Prohibits late fees if the card issuer delayed crediting the payment;
  • Requires that payment at local branches be credited the same-day;
  • Requires credit card companies to consider a consumer's ability to pay when issuing credit cards or increasing credit limits.

Provides Greater Disclosure of Card Terms and Conditions

  • Requires cardholders to be given 45 days notice of interest rate, fee and finance charge increases;
  • Requires issuers to provide disclosures to consumers upon card renewal when the card terms have changed;
  • Requires issuers to disclose the period of time and total interest it will take to pay off the card balance if only minimum monthly payments are made;
  • Requires full disclosure in billing statements of payment due dates and applicable late payment penalties.

Strengthens Oversight and Penalties Credit Card Industry Practices

  • Requires each issuer to post its credit card agreements on the Internet, and provide those agreements to the Federal Reserve Board to post on its website;
  • Requires the Federal Reserve Board to review the consumer credit card market, including the terms of credit card agreements and the practices of credit card issuers and the cost and availability of credit to consumers;
  • Requires Federal Trade Commission rulemaking to prevent deceptive marketing of free credit reports;
  • Increases existing penalties for companies that violate the Truth in Lending Act for credit card customers.

Ensures Adequate Safeguards for Young People

  • Requires issuers extending credit to young consumers under the age of 21 to require either a co-signer or proof that the applicant has an independent means of repaying any credit extended;
  • Limits prescreened offers of credit to young consumers;
  • Prohibits increases in the credit limit on accounts where a parent, legal guardian, spouse or other individual is jointly liable unless the individual who is jointly liable approves the increase;
  •  Increases protections for students against aggressive credit card marketing, and increases transparency of affinity arrangements between credit card companies and universities.

Gift Card Protections

  • Protects recipients of gift cards by requiring all gift cards to have at least a five-year life span, and eliminates the practice of declining values and hidden fees for those cards not used within a reasonable period of time.