My Way Credit

Today, Senator Chris Dodd introduced the Credit Card Accountability, Responsibility and Disclosure Act (aka CARD), which would institute sweeping reforms and has received widespread support from Senate leaders as well as from key consumer advocates. The bill calls for:

1. The end of universal default and similar “any-time, any reason” increases in interest rates. Any interest rate increases will apply only to future credit card debt.
2. Fairness in how card payments are applied. If the bill becomes law, payments will have to be credited against the credit card balance with the highest interest rate.
3. A ban on double-cycle billing, which would prohibit interest to be charged on debts that are paid on time.
4. The prohibition of exorbitant rates and fees. For example, lenders would no longer be able to charge interest on late fees and over-the-limit fees. And once a penalty rate has been instituted, the issuer will have to lower it after six months of “good behavior.”
5. Fairer disclosures of card terms and conditions. Lenders will have to tell cardholders how much time it will take and how much interest it will cost if they only send in the minimum required payments.
6. More time. Credit card statements will have to be mailed 21 days before the bill is due rather than the current 14 days. Also, issuers will have to give 45 days’ notice of a rate increase.

The bill institutes some safeguards for young adults, requires the GAO to study the impact of the interchange fee on consumers and merchants, and empowers the Feds to develop further regulations governing unfair or deceptive practices by banks and savings and loan institutions.

If It’s Good Enough for Them
I could go on and on about other important aspects of the CARD Act, but thought you might prefer hearing what some of the best minds on credit card reform have to say about this legislation:

• Linda Sherry of Consumer Action calls it a strong consumer protection bill that “carries a number of landmark protections, including a much needed ban on unilateral changes to card agreements – a brutally unfair practice which no cardholder, no matter how responsible, can avoid.”

• “The Consumer Federation of America commends Chairman Dodd for offering comprehensive legislation to stop credit card companies from hitting consumers with unwarranted interest rate hikes and outrageous fees,” says Travis Plunkett. "As the economy worsens, these traps and tricks are pushing more families closer to the financial brink.”

• “For everyone who has been tricked or trapped by a credit card agreement that is impossible to understand, this is powerful news,” explains Elizabeth Warren. “The CARD Act could save families more than a billion dollars each year by cutting out the most unfair of the penalty fees and sky-high interest rates. Families need this help, and I am proud to stand behind Senator Dodd’s efforts to provide it.” 

• “Fundamentally, this bill stands for a very simple proposition that every American expects credit card companies to abide by - a deal is a deal," says Consumers Union’s Jeannine Kenney. "The Credit CARD Act prevents card companies from changing the rules in the middle of the game – by jacking up interest rates for card holders in perfectly good standing for any reason, or no reason at all, and applying that rate to their existing balances."

• “For too long, the bank regulators’ ‘anything goes’ deregulatory philosophy has given credit card companies a license to steal," says Ed Mierzwinski of US PIRG. “Senator Dodd’s CARD Act will grant students and others critical new protections against these unfair practices in the credit card marketplace.”

Please join with me and let your Senators know that it’s time to put an end to credit card abuses.

Nancy Castleman – Co-author of "Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com.