Groups urge House to approve credit card reform
WASHINGTON, March 31, 2009 — The House Financial Services Committee’s subcommittee on financial institutions and consumer credit will take up the “Credit Cardholders’ Bill of Rights Act of 2009” on April 1.
The credit card reform legislation, introduced by Rep. Carolyn Maloney (N.Y.), would put the Federal Reserve’s new rules for credit card companies into effect three months after the bill is signed into law The Fed’s new rules, which would stop a variety of unfair credit card practices, currently do not go into effect until July 1, 2010. A number of major card issuers are now increasing fees and interest rates on millions of Americans before the new rules take effect.
Rep. Maloney’s bill would also allow retroactive increase in rates only if a consumer is more than a month late on a payment, increase the advance notice of impending rate hikes, and put other pro-consumers reforms in place.
The national consumer groups Consumers Union and the Consumer Federation of America urged committee members to vote in favor of a bill with a three-month implementation.
“This bill abolishes some of the most abusive lending practices that trap consumers in a never-ending cycle of debt,” said Pam Banks, senior attorney for Consumers Union. “Some credit card companies are now raising fees and rates before the Federal Reserve’s new rules go into effect in 15 months. The bill would move up the effective date, which would go a long way toward helping consumers.
Travis Plunkett, legislative director for the Consumer Federation of America, said, “Federal regulators and lawmakers have determined that the industry practices addressed in this bill are abusive, so it makes no sense to let credit card companies keep hurting consumers with these practices well into 2010.”
The Consumer Federation of America is a nonprofit association of over 280 pro consumer groups, with a combined membership of 50 million people. CFA was founded in 1968 to advance consumers’ interests through advocacy and education.
Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers
• Credit Cards in the U.S.: 1.22 billion. (663 million bank cards, 555 million retail/gasoline cards.) Source: CardTrack.com.
• Revolving Consumer Credit Outstanding in the U.S.: $969.9 billion, as of July, 2008. Source: Federal Reserve Statistical Release, Consumer Credit Outstanding, Table G. 19, September 8, 2008.
• Credit Card Debt Held by Consumers in the U.S.: about $850 billion, as of July, 2008. Source: CFA calculation, based on the data above reported by the Federal Reserve Board.
• Average Credit Card Debit per Household: $7,430. Source: 114.4 million households; U.S. Census Bureau, “American Families and Living Arrangements 2006.”
• Average Credit Card Debt per Card-Holding Household that Carries a Balance: $17,103. Source: 74.9 percent of households (about 85.7million) have a credit card. 58 percent of households with a credit card (about 49.7 million) do not pay their balance in full every month; Federal Reserve Board, “2004 Survey of Consumer Finances.”
• Credit Card Solicitations mailed in 2007: 5.2 billion. Source: Synovate Mail Monitor, “US credit card mail volume declined in 4th quarter 2007 as troubled issuers pull back,” February 2008.
• Credit Card Solicitations per Household: 36.
• Credit Card Accounts that Pay a Late Fee: 35 percent, representing about 242 million cards.
• Income from Penalty Fees for Six Largest Credit Card Issuers: $7.4 billion.