Released: June 01, 2005

Bill outlawing credit card ‘universal default’ passes N.Y. State Assembly

Legislation prohibits credit card companies from increasing interest rates based on consumers' non-related credit history

Consumer Action applauds the action of the New York State Assembly yesterday to lay down the law to prohibit unfair "universal default" policies that increase cardholder rates because of changes in their overall credit history. The outrageous rate hikes are applied to cardholder's existing balances, and few companies allow consumers a way to opt out of the crushing finance charges. "This is the only industry that re-prices something you have already paid for," comments Linda Sherry of Consumer Action, noting that universal default rates were as high as 29.99% in 2004 and have grown to as much as 35% this year. The N.Y. legislation is a wake up call to the industry. According to the sponsor of the legislation, Assemblyman Peter M. Rivera (D-Bronx), chair of the Assembly Puerto Rican/Hispanic Task Force, Assembly Bill 809 will "stop the current attack on consumers by credit card and banking corporations." Sherry said that Consumer Action encourages federal lawmakers to follow suit and help end universal default practices by passing Senate Bill 499 authored by Senator Chris Dodd (D-CT). Consumer Action, Consumer Federation of America and U.S. Public Interest Research Group (PIRG) have issued joint recommendations for reforming anti-consumer practices in the credit card industry. Click here for the platform. Click here for Consumer Action's 2004 credit card survey. Consumer Action expects to release the 2005 survey in late June.