Offering frequent news and analysis from the majestic Evergreen State and beyond, The Cascadia Advocate is the Northwest Progressive Institute's unconventional perspective on world, national, and local politics.

Tuesday, May 19, 2009

Congress cracks down on some of the credit card industry's most abusive practices

This is welcome news:
The Senate voted overwhelmingly on Tuesday to put new restrictions on the credit card industry, passing a bill whose backers say will make card-issuers spell out their terms in fewer words, using plain English, and treat customers more fairly.

The 90-to-5 vote, following a 357-to-70 vote in the House on April 30, made it likely that President Obama will have a measure on his desk before the Memorial Day recess. The differences between the House and Senate versions will have to be worked out, but given the political atmosphere it seems likely that the House-Senate negotiations will move quickly.
Every single Northwest senator voted yes on the bill, H.R. 627, titled the Credit Cardholders' Bill of Rights Act of 2009.

H.R. 627 won't legislate predatory lending and bank trickery out of existence, but it does provide a new level of protection for Americans who have credit cards. Some of the provisions have already been mandated by the Federal Reserve, but H.R. 627 goes further and codifies all of the rules into law.

For example:
  • Banks would no longer be able to charge an extra fee for paying credit card bills over the phone or online;
  • Credit card agreements would have to be published on the Internet so customers can more easily access the terms;
  • Cardholders would be able to pay their bill up until five o'clock on the evening of the due date, or the next business day if the due date is a Sunday/holiday;
  • Banks would have to notify cardholders forty five days in advance of any increase in interest rates, and explain the reason for the increase;
  • Banks would not be able to increase rates on an existing balance due to a late payment unless the payment is more than sixty days late;
  • Banks would not be able to sign up Americans under twenty one for credit cards unless young people can demonstrate they have the ability to repay what they borrow.
  • Banks would not be able to collect over-limit fees if they authorize a charge that would max out a customer's card, unless a customer has opted to go over limit.
These changes have all been long overdue. (They are not yet final; the House and Senate have to reconcile their differences in the next couple of weeks).

It's no surprise that banks don't like them, but given the overwhelming support in Congress for reform, there's not much banks can do. Pretty soon they'll turn on a dime and start citing the new rules in their advertising. Because that's how Corporate America rolls. Big banks, just like big auto companies or big chemical firms, have to be dragged kicking and screaming along the path to more responsible business practices.

There is the possibility that banks, deprived of ways to profit off the backs of their most struggling customers, will increasingly turn to their best customers instead, hiking fees and slashing benefits. They're already starting to do this, so that's not a good argument against this legislation.

Those who have accounts in good standing with big banks like Bank of America, JPMorgan Chase, or Citigroup should bring their balances down to zero and get a card from a local credit union. Most credit unions will happily lend to Americans who have a good credit score, and they have every reason to treat their customers fairly: they're owned by their customers.


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