Consumer Groups Ask Congress to Rein in Credit Card Abuses

Contact: See contact Information at end of release.

Wednesday, Jan. 24, 2007 — On the eve of an important U.S. Senate Banking Committee hearing on unfair credit card practices, national consumer groups call on Congress to crack down on card issuers:

  • Who raise interest rates and fees - often for no reason
  • Who change the rules in the middle of the game
  • Who penalize customers with high interest rates if they have a problem with another company

These and other unjust practices will be raised at an oversight hearing before the U.S. Senate Banking Committee on Thursday, Jan. 25. For hearing information, visit the Senate Banking Committee website.

The attached Joint Credit Card Reform Platform has been created by ACORN, the Center for Consumer Finances, Consumer Action, Consumers Union, the Consumer Federation of America, Demos, the National Association of Consumer Advocates and the U.S. Public Interest Research Group.

Joint Credit Card Reform Platform

Joint Recommendations of Consumer Groups on the Eve of the Jan. 25, 2007 U.S. Senate Banking Committee Oversight Hearing on Unfair Credit Card Practices

Eliminate reckless and abusive lending by credit card companies

No unsound loans. Make issuers offer credit the old fashioned way, using sound underwriting principles based on the ability of consumers to pay and that ensure the cardholder is not overextending financially by taking on more debt.

Restrict lending to youth without conditions. Young people deserve credit, but only if they qualify. Yet right now, young people are the only group that can obtain a credit card without either a positive credit report, a job, or other evidence of ability to pay, or, barring any of these, a co-signer. No other adult can get a credit card without meeting at least one of these conditions. Young people should have the same safeguards.

No abuse of consumers in bankruptcy. Credit card issuers drive consumers into bankruptcy with abusive terms and collection practices. Stop issuers from collecting on these abusive loans in bankruptcy.

End deceptive and unjust terms, interest rates and fees

Ban retroactive rate increases. Stop issuers from changing the rules in the middle of the game by raising interest rates on past purchases.

No unilateral adverse changes in terms for no reason. Credit card company contracts currently claim the right to change terms for any reason, including no reason. Any change in terms during the course of the contract should require knowing, affirmative consumer consent and reasonable notice.

Ban universal default in all its forms. Prohibit punitive "universal default" interest rates based on alleged missteps with another issuer but involving no missed payments to the credit card company itself. It is unfair to impose a penalty rate on a consumer who has not made a late payment to that creditor. Stop card companies from using a change in terms clause to impose penalty rates.

Stop late fees for payments mailed on time. Require credit card companies to follow the Internal Revenue Service (IRS) and accept the postmarked date as proof of on-time payments. This will also eliminate the tawdry practice of assessing late payment fees when payment is received on the due date, because it did not arrive by a specific time (such as 11 a.m.).

Relate fees to cost. Ensure that all fees and other charges closely match the true cost borne by the card issuer.

End roll-over or repeat late and over-limit fees. Ban fees that are charged in consecutive months based on a previous late or over the limit transaction, not on a new or additional transaction offense, even if the consumer remains over the previous limit.

No fees for creditor approved transactions. Don’t let the credit card company charge a fee for a transaction it has approved. Ban over-limit fees when the issuer approves the over limit transaction.

Empower consumers with more detailed information.

Ban deceptive credit card offers. Solicitations and “invitation to apply” solicitations that do not make a truly firm offer of credit are deceptive because they lead consumers to believe that they are pre-approved for or have a good chance of getting certain interest rates. Most consumers instead receive cards at much less favorable interest rates and terms.

Simplify pricing. Reduce the number and types of fees so consumers can compare cards and understand the real cost of using the card.

Real minimum payment warning. Give each consumer a personalized warning on his or her monthly statement calculating the length of time—in months and years—and the total interest costs that will accrue, if the consumer makes only the requested minimum payment.

Ban unfair teasers. Stop issuers from downplaying permanent interest rates in advertisements and solicitations and from trumpeting temporary rates as “fixed rates.”

Enhance 'Schumer Box' disclosures. Include a Schumer box disclosure table in all cardholder agreements containing personalized information about the terms of the card granted. The box should include the APR, the credit limit, and the amount of all fees, such as late charges, cash advance fees, over limit fees and any other applicable miscellaneous fees.

Give consumers strong protections to deter illegal acts

Ban pre-dispute binding mandatory arbitration. No consumer should be forced to waive his or her right to a court trial as a condition of using a credit card. Prohibit binding mandatory arbitration for consumers' claims and for collection actions against consumers.

Toughen Truth In Lending Act (TILA) penalties. TILA penalties have stagnated since 1968.

Give aggrieved consumers a private right of action to enforce the Federal Trade Commission Act to challenge unfair or deceptive practices by businesses, including banks.

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ACORN, Jordan Ash, 651-503-4555 Center for Consumer Finances, Rochester Institute of Technology, Robert Manning, 585-475-4342

Consumer Action, Linda Sherry, 202-588-3440

Consumers Union, Norma Garcia, 415-431-6747

Consumer Federation of America, Travis Plunkett, 202-387-6121

Demos, Cindy Zeldin, 202-956-5144

National Association of Consumer Advocates, Ira Rheingold, 202-452-1989

National Consumer Law Center, Alys Cohen, 202-452-6252

U.S. PIRG, Ed Mierzwinski, 202-546-9707



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