Credit Card Reform Is Coming

HoweStreet.com - Vancouver ,British Columbia, Canada
Like it or not (banks won't but consumers will) credit card reform is coming.Rep. Carolyn Maloney (D-NY) with backing from Rep. Barney Frank (D-MA), chair of the House Financial Services committee, introduced the Credit Cardholders' Bill of Rights while the Stop Unfair Practices In Credit Cards Act was introduced last May by Senators Carl Levin (D-MI) and Claire McCaskill (D-MO).There you have it. Both the senate and house are sponsoring credit card reform. One version or other is sure to pass in 2009. Keeping Card Companies HonestMSNBC is reporting Bill would keep credit card companies honest.
Could it be? Is Congress really ready to put an end to the credit card industry’s most abusive practices? A bill introduced a few weeks ago by Rep. Carolyn Maloney (D-NY), would change the way most credit card companies do business and provide significant consumer protection for every cardholder. “In recent years the playing field between credit card companies and credit cardholders has become very one-sided,” Maloney said. “A credit card agreement is supposed to be a contract, but what good is a contract when only one party has the power to make decisions? ”The Credit Cardholders’ Bill of Rights Act of 2008, known as H.R. 5244, would protect cardholders from arbitrary interest rate increases and unfair fees. Maloney, who chairs the House Financial Institutions and Consumer Credit Subcommittee, is quick to point out that her bill does not have any price controls. It does not cap rates or fees.

Could Bankruptcy Reform Be the Cause for the Dramatic Increase

in Predatory Practices by Credit Card Companies?

Some aspects of this legislation have little to do with the free market, but then again many of the abuses it is attempting to correct have nothing to do with the free market either. For example, the Bankruptcy Reform Act of 2005 attempted to make people debt slaves forever, even after bankruptcy. That legislation fueled a massive increase in predatory credit card lending that would not have occurred in a free market where lenders would have been more concerned about the credit risks they were lending to. Legislation on top of legislation is where we are today, each attempting to undo previous wrongs. The best thing to do would be to scrap everything and start over, but realistically that is not going to happen.
The rules keep changing. Chances are the contract you have with your credit card company gives it the right to change the terms of the deal at any time and for any reason with just 15 days written notice. That includes increasing your interest rate."No other business in America could raise the price on something after you purchased it,” says Travis Plunkett, legislative director at the Consumer Federation of America. “But that’s exactly what credit card companies do when they increase your interest rate on an outstanding balance.”
My Comment: I am not a legal scholar but self modifying one sided contracts written in fine print no one could possibly read seems questionable at a minimum.
And then there’s “double-cycle billing.” It lets the bank charge interest on balances you’ve already paid. Here’s how it works. Let’s assume you had a credit card bill of $1,200 and you paid off all but $100. With double-cycle billing you’ll be charged interest on the entire $1,200 the following month, not just on the $100 you carried over.“That seems unfair to us and it seems unfair to a lot of consumers,” says Consumers Union’s Jeannine Kenney.