The U.S. House hass approved H.R. 627, the Credit Cardholders’ Bill of Rights, a timely piece of legislation since many people are using credit cards to survive in this recession/depression. Consumer advocates say that because of the practices of credit card companies, many consumers “run into a wall” when their interest rate is bumped up or they run out of credit. That often happens when a person looses their job, and many have been using credit cards to allow them to keep up with their mortgage payments.
House Majority Whip Jim Clyburn of South Carolina says the Credit Cardholder’s Bill of Rights protects against arbitrary interest rate increases, unfair penalties, due-date gimmicks, misleading terms and other practices. “Our whole thing is to try to get people to stabilize their lives. All the fine print and that sort of thing that gets people into trouble, we’re working very hard to try to make sure this bill can deal with that.”
Consumer advocates say card companies now tie interest rates to a person’s overall current credit profile retroactively, after they have signed one rate agreement. That may mean bumping up rates to close to 30 percent A.P.R. just because of something not related to that company, like a payment not received by some other business entity, or because the consumer opened another credit card, or even because they closed a credit card.
Clyburn says many lawmakers were not aware that was happening.
“Many of us were surprised to find out that companies are using what may or may not bet he record from some other lender to set their interest rates. They have no idea what goes into a credit cardholder failing to pay. The bill may have been in dispute or something,” said Clyburn.
Clyburn says the current bill is not perfect, but it would at least require a card company to give 45 days notice before a rate increase is implemented. “A lot of credit card companies make a lot of money off these arbitrary interest rate increases, and we’re saying you won’t be able to do that, unless you give notice.”