The Credit Cardholders' Bill of
Rights Act of 2008 passed the House on Sept. 23 by a vote of 312-112
(with nine members not voting).
The bill is aimed at "major industry abuses that unfairly
hurt consumers.
Highlights:
- Requires card companies to give cardholders 45 days
notice of any interest rate increases.
- Prevents the so-called "universal default" rate
increase.
- Prevents the so-called "double-cycle billing"
practice.
- Gives cardholders time to pay their bills by
requiring card companies to mail billing statements 25 calendar days
before the due date (14 days is the current minimum).
- Requires that payments made before 5 p.m. EST on the
due date are considered timely.
- Prohibits card companies from charging late fees
when a cardholder presents proof of mailing his/her bill within 7
days of the due date.
- Prevents card companies from charging over-the-limit
fees on a cardholder with a fixed credit limit.
Some significant provisions:
Retroactive interest rate increases and
universal default limits. Credit card companies
frequently raise your interest rates if you are late on your
payment, if you are in default or sometimes for no reason at all.
The Credit Cardholders' Bill of Rights would limit a card issuer's
ability to raise interest rates.
For example, a credit card company could not raise
interest rates on existing balances. If the interest rate on feature
balances was raised, the credit card issuer would be limited on how
quickly it could insist that the old balance subject to the lower
interest rate is paid off.
Another protection is 45-day written notice before
higher interest rate increases.
Double-cycle billing. In
most cases credit card companies go back two billing cycles to
calculate cardholder's average daily balance. The result is that you
have to pay interest rates on a balance you paid off the previous
month. The Credit Cardholder's Bill of Rights would attack
this practice as well.
Statements must be sent 25 days before payment is
due. The Credit Cardholders' Bill of Rights would require all credit
card companies to send out bill 25 days before it is due. It will
give customers plenty of time to pay the bill before interest
charges accrues.
Over-the-limit transactions. A dark area that has been
widely criticized. If you go over your limit, usually you are
slapped with a higher fee. The problem is that first credit card
companies do allow such practice and if you do go over your limit,
they will charge you another fee.
Argument is that you should know your credit limit.
The Act would allow consumers to elect to have their credit card
company reject any transactions that would send them over their
limit.
More Highlights:
- Authorizes a consumer who receives such notice to: (1)
cancel the credit card without penalty or the imposition of any fee;
and (2) pay any outstanding balance that accrued before the
effective date of the increase at the APR and in the repayment
period in effect before notice was received.
- Prohibits a creditor from imposing interest on credit
repaid within the interest-free repayment time period. (Thus
prohibits double cycle billing).
- Prohibits the imposition of fees on any outstanding
balance on a credit card account attributable only to accrued
interest on previously repaid credit.
- Requires each periodic statement of account to provide
specified information on obtaining the payoff balance.
- Prohibits a creditor from furnishing information to a
consumer reporting agency concerning a newly opened credit card
account until the consumer has used or activated the credit
card.
- Details mandatory pro rata payment allocations by a
creditor.
- Authorizes a consumer to opt-out of creditor
authorization of over-the-limit transactions if fees are
imposed.
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