Maloney Introduces New Credit Cardholders Bill Of Rights Act

Rep. Carolyn Maloney, D-NY, introduced the Credit Cardholders' Bill of Rights Act of 2008. The comprehensive credit card legislation is targeted at leveling the rights of credit card issuers and consumers. It is actually an attempt to make credit companies play fair. The bill is a result of more than a year's research of credit card market and the ways of improving services and protections for credit card holders.

The protective legislation is a pressing need nowadays. The subprime mortgage crisis can cause the crisis on the credit card market. Consumers use their plastics as the main source of getting money, while paying the most part of their income for the mortgage. No wonder that such financial pattern can lead to accumulating debt that they can't pay off.

Trying to keep the profits permanent and reduce possible default risks, banks protect themselves by raising interest rates or even cancelling credit cards when they see any reason to do it. The bill of rights is intended to protect cardholders against increases of interest rate and prohibit credit companies from imposing excessive fees on consumers.

Maloney said that a credit card agreement used to be a contract, but now cardholders are not able to appeal against the unfair increase of interest rates and fees. The new bill of rights levels the opportunities of credit companies and cardholders while encouraging fair competition on the credit card market.

Maloney added that the bill sets no price control, interest rate caps or fixed fees. Credit card issuers are commercial institutions that provide a useful service and need to make a profit. But consumers deserve the right to make financial decisions and manage their own credit.

The new bill of rights contains the following points:

• Protection against arbitrary rate increases. No more APR increases for any reasons which have no relation to the cardholder's behavior with that card. And no more universal default practice, where your APR can change according to the default on the other loans.
• Right to cancel credit cards and pay off existing balance at the existing APR. Credit card issuers can't raise your APR just because you want to close your account or change a credit company. You will have three billing cycles after the APR increase to say no to these new terms.
• No Penalties for cardholders making payments on time. Credit companies can't charge interest on balance that is paid on time during a grace period. This prevents the practice of double-cycle billing.
• Protection from due date gimmicks. Credit card issuers are required to mail billing statements 25 calendar days before the due date (now the minimum is 14 days). The payments that were made before 5 p.m. EST on the due date are considered to be on time.
• Right to set credit card limits. Now you will have the option to set credit limit on your credit card that cannot be exceeded. No more over limit fees if you have a fixed credit limit.

No doubt that credit card issuers will resist the new bill. But the present-day situation in financial services industry shows that it is the high time for such legislation.