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Credit Cardholders’ Bill of Rights Passes the House

This article was written by in Credit. 36 comments.


I didn’t think this was even already in motion, but I’m happy to report that the proposed “Bill of Rights” for credit card-holders (which is almost every adult) passed through the House of Representatives by a huge margin: 312 to 112.

It’s amazing that 112 Representatives would even vote against such a thing, which has no downside that I can see.

Read the whole story at the New York Times.

Updated May 26, 2009 and originally published September 25, 2008. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Smithee formerly lived primarily on credit cards and the good will of his friends. He is a newbie to personal finance but quickly learning from his past mistakes. You can follow him on Twitter, where his user name is @SmitheeConsumer. View all articles by .

{ 18 comments… read them below or add one }

avatar Andy

Although they needed to curb the deceptive practices, they have all but guaranteed that many, many people are no longer going to have access to credit.

Payday loan companies have just become far more profitable.

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avatar Brian

Perhaps 112 representatives feel that it is up to the consumer to not be a sucker and feel that they have better things to do with their time.

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avatar Luke Landes ♦127,485 (Platinum)

Brian: It takes no more time to vote “yes” than it does to vote “no.” Also, I agree with Smithee… many tircks practiced by credit card companies are not properly disclosed to the consumer in a way that makes sense (two-cycle billing) and some shouldn’t exist at all (univeral default). Those in dire need of credit wouldn’t pay attention to these details even if they understood them. Nevertheless, the bill passed the House. Something still needs to pass the Senate, and of course, the president.

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avatar Mike

A good point Brian. The same thing should be said for businesses to be responsible and take responsibility for their actions/greed. Hence, no bailouts.

If they cannot handle a recession, steps need to be in place that will prevent this in the future. Sadly, the guilty will condemn the innocent either way. Recession, or stuck with additional $700 billion debt plus interest owing & HOPEFULLY, they’ll break even or turn a profit, but that’s not guaranteed.

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avatar Marion

Please contact the 112 representatives to find out why they opposed it, then aggregate their responses so we can all better understand why they feel this bill is not in everyone’s interests.

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avatar Brian

After having read the summary on http://www.govtrack.us/congress/bill.xpd?bill=h110-5244&tab=summary I’m really curious if you agree with it or not. Knowing that you have to take all of it if you take any of it.

Were it me, I would vote down such a bill, and I’m proud that some house members did. There are some really good things in it, but the bad things in it (to me) outweigh the good it would do.

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avatar Luke Landes ♦127,485 (Platinum)

Brian: Which points do you consider “bad?” They are all good for the consumer. I wouldn’t say they’re great for credit card companies, but it is reasonable.

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avatar Brian

I think that Universal Default is a good thing, and helps creditors identify early possible problems.

I don’t think double billing cycles (average daily collected balance over 2 months) is something that should be federally regulated.

The portions of the bill that deal with different ways of reporting I have no issue with.

I say, buyer beware. There are many good sites on the internet (available at any public library) to research things *BEFORE* you get into them. Much is written on many fine sites about credit cards, how to use them, what to look for, etc., that the consumer really has no excuse. Read the fine print, ignorance is no excuse. (IMO)

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avatar juggler314

Brian,

You are right when you say that universal default might be a tool used to punish people that will become problems. However what about the many times that a late payment is because a payment is lost in the mail, or by a bank error out of your control. These people obviously aren’t problems yet they will be punished (and has been oft pointed out, once your APR goes up it can be very difficult to get it back down even if you prove the late payment was a mistake and it’s subsequently removed from your credit history).

Also, anyone that is really having money problems will likely be paying late on all his/her cards soon, so universal default will likely only get you a month or two’s extra interest.

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avatar Brian from comment #2

I failed to answer the quesiton posed by Flexo regarding my “better things to do” comment. Obviously, the legislature has enough to worry about with the bailout (a huge crock of BS, but that’s for another time), the war, etc., but perhaps they also feel (correctly so, IMO) like it’s not their job to try to protect people from their own poor decisions in doing business with these companies. This is (for now, anyway) a free market and if people do not like the business pradtices or ethics of a particular company, then it is their responsibility to avoid doing business with that company: it is NOT (emphasis) appropriate for consumers to do business and then cry to the government when they are abused. If you went to Best Buy to buy a TV and were called names, ignored, and overcharged, woudl you go back? Of course not. How is this any different? I understand that some regulation is necessary when it comes to certain industries that are intimately tied to the lives of every American (see: trusts, energy conglomerates, etc.), but no one is forced to use credit cards.

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avatar Brian from comment #2

What happened to the comment I sent in before Comment #10? Did it not make it to the moderators?

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avatar Marcus

My intent here is to give some perspective on how it used to be, before shared databases and the need for some type of control on the Credit Card and Banking Industries. A number of Laws have been passed that only protect them and their revenue source. Including the revised Bankruptcy Code.

In the olden days, before 1995, 1994 – I recall sitting and waiting for my banker and reading the Magazines where the Target Audience was Bankers. I was suprised as to the tone of the articles. It was all about how the next big revenue source was to be Fees and Penalties. I could see the handwriting on the wall. Just research, how much money Banks make on fees.

At the time I had various Credit Cards totaling over $75,000, with many in my Safe Deposit Box. I also had a $30,000 loan through Farm Credit Services, a quasi-federal program.

Occasionally, my Farm may hit a rough spot and I would make minimum payments or miss a payment date. All cards were paid in Full at least once a year. But never did my Interest Rate go up on the card in question or other cards, nor did my Credit Limits decrease.

There was no Universal Default, so I could count on the Cards in the Deposit Box, in an Emergency. And the credit limits would not change, plus I had checks with limits up and over $5000.00 to $10000.00 that I could write for a very small fee and thence put in my Business Account.

With the Advent of Computers and hooking up these databases amongst the Credit Card Holders all that has changed.

I weaned myself off the most onerous Credit Cards and found other funding. The Credit Card Company’s loss, in my opinion.

Thankfully the Internet gave me the tools, to find these Companies that wanted my Business.

I do not think this is Off Topic, but gives a perspective as to how the Advent of Computers, Databases and the Internet as the vehicle to share information, has been to the detriment to Public.

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avatar John

Not intending to start a political war but of the 112 Representatives would voted against the bill, 111 were Republicans.

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avatar kitty

“The same thing should be said for businesses to be responsible and take responsibility for their actions/greed. Hence, no bailouts.”

There is a huge difference. Consumer’s failure to understand how the cards work hurts the consumer. Unless there are many consumers defaulting, it doesn’t hurt others. It does not cause massive job losses, it doesn’t hurt the whole world economy or makes it difficult for businesses – all businesses – to obtain credit they need for day-to-day operations like payroll: or did you think businesses just kept cash in money market accounts? The risk of this situation is much worse for world economy than you usual short recession. This is what this bailout is about – to unfreeze credit markets which are all but frozen right now and are hurting businesses that have nothing to do with mortgages, not just to save a few bad banks.

Incidentally, I just love it when people say “let’s punish these businesses” as if a large business was a person. A large bank isn’t a small operation with 5 people who make joint decisions, and all share responsibility. Large businesses employ thousands of people in different capacities (e.g. computer programmers… or tellers) out of whom only a very small percentage were responsible for the mess. Those responsible whom everyone wants to punish are actually the ones that are the richest and they suffer the least when the business fail. It’s a bit of topic, but I am not the one that came up with the comparison.

Back about cards. Yes, some practices are deceptive, although someone who has always paid her bills in full isn’t likely to even know of them – I only found out about these practices from reading these blogs. Even late fee – if you’ve been good about paying on time and is late once, you can more often than not call them and get it dropped. I did it once or twice. They allow you to set up for automatic payment in full and then you are never late and never have to pay any interest. Even in a (real – e.g. medical) emergency a responsible person with good credit can take advantage of credit cards by using 0% offers and shuffling money from one 0% offer to the next – a friend of mine did it when her mother needed expensive cancer treatment.

I don’t know anything about double cycle billing, so I cannot comment on that. I am willing to admit that some practices are bad.

I am with Brian on universal default – if you were to lend your own money to somebody you don’t know with no collateral, wouldn’t you be interested to know if this person is responsible? As I see it, universal default is more the issue of risk vs reward. If someone is perceived to be of higher risk, you’d want higher reward i.e. higher interest rate. Being late on payment to somebody else, to anybody, shows that the person is a bad risk. So I understand this rule. As to payment being lost in the mail – with many businesses a simple phone call would resolve the issue with no damage done or information reflected anywhere.

I agree with Andy that this bill will make it more difficult for many to obtain credit. It’ll also result in fewer really good offers for those of us who have been responsible – fewer 0% offers, fewer rewards, etc. It’s also incredibly bad timing given the current credit crunch and all the bank problems.

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avatar Tim

that bill doesn’t punish people for having bad credit. it says, hey ruin your credit and then credit card companies can’t punish you.

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avatar Brian (comment 6 and 8)

Juggler314,

Banking error aside, which I assume is easily fixable with proper documentation.

Payment lost in the mail should not be an issue in the year 2008. With Electronic banking, bill pay, etc., a late payment due to such things is no longer an excuse. For me personally, I always have enough to pay my commitments in the bank, so that the day the bill arrives, I pay it. If someone is waiting until the last minute, perhaps that demonstrates a mindset that I’d want to know about as a creditor. :)

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avatar juggler314

Brian,

I’m not sure if you work for a credit card company or simply refuse to see the reality here.

You make a good point that really there shouldn’t be late payments in today’s day and age. I personally use paytrust to receive all my bills online, it keeps me in the loop on when everything is due, guarantees delivery dates for payments (whether they go as e-payments or mailed checks) and just does a stellar job – I am personally not the most organized person and many years ago before I started doing this online I would lose a statement or just forget to pay a bill here and there (thankfully I was young enough and not credit seeking that it really didn’t matter at the time).

However that does not mean this is true for everyone, you take for granted online bill payments should keep anyone from missing a payment. But the US mail service does occasionally lose mail and sometimes that mail is a bill. As has been pointed out sometimes credit card companies change payments dates without notice, so lets say they decide to change your due date, and that happens to be the bill that gets lost…well now you are screwed.

Also, not everyone in the US is computer savvy, or even has one. You can’t take things like online bill payments and online statements for granted across the entire country.

It is interesting that you completely ignore the valid example I gave by flippantly dismissing banking error as “easily fixable”. Spend some time at consumerist or just with google in general and you’ll see that this is not an easily fixable problem. With universal default a banking error at one institution can increase not only the APR on every credit card you hold, but it can also make it more expensive for you to get insurance and many other types of financial services, anyone that pulls a credit report will see that banking error, at least until it is fixed, which can take months sometimes. And just because you manage to get the original bank to fix the error, and reset your APR/late fees/whatever. Doesn’t mean every other entity you bank with will similarly change their rates back – the point is that it is not in the interest of the companies to do so.

I also want to point out that I’m not defending things that have happened to me, I have not had a late payment in many many years, nor have I ever had a credit card raise my APR. Even when I had some massive debt I paid my bills accordingly – just in case you thought I was someone complaining about things that have happened to me. My experiences reading about the plight of people that have been royally screwed over by some of these predatory practices is what leads me to be so vocal about the issue.

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avatar Brian

Juggler314,

I wanted to make sure I address all of your issues, and I really thought you might be kidding on some of them, so here goes.

“I’m not sure if you work for a credit card company or simply refuse to see the reality here.”

I do not now, nor have I ever worked for a credit card company or in any financial industry. My view on reality is that when people make commitments they should keep them.

“You make a good point that really there shouldn’t be late payments in today’s day and age. I personally use paytrust to receive all my bills online, it keeps me in the loop on when everything is due, guarantees delivery dates for payments (whether they go as e-payments or mailed checks) and just does a stellar job – I am personally not the most organized person and many years ago before I started doing this online I would lose a statement or just forget to pay a bill here and there (thankfully I was young enough and not credit seeking that it really didn’t matter at the time).

However that does not mean this is true for everyone, you take for granted online bill payments should keep anyone from missing a payment. But the US mail service does occasionally lose mail and sometimes that mail is a bill. As has been pointed out sometimes credit card companies change payments dates without notice, so lets say they decide to change your due date, and that happens to be the bill that gets lost…well now you are screwed.”

So I went to one of my credit cards website and I find that one can pay with, normal mail, certified mail, overnight delivery service, wire transfer, Western Union, you can use your credit card companies website, you can pay by eCheck over the phone, ACH (many (all?) credit card companies offer an ACH (Automated Clearing House) option, even a billpay service may be available depending on your banking preferences. People have been paying credit cards for decades now. You borrowed the monies, you know you owe them, even if your bill gets lost in the mail, you can/should check the card issuer’s website/phone help line to check on this information. There really isn’t a reason you should be late, ever.

I will say that I’m right there with you on the issue of credit card issuer’s not being able to change due dates. I think that’s annoying, and they do it to generate fees. Nonetheless, it’s not an excuse to miss a payment. If you’re living paycheck to paycheck where this might be an issue, you have much BIGGER issues to deal with than a late credit card payment.

“Also, not everyone in the US is computer savvy, or even has one. You can’t take things like online bill payments and online statements for granted across the entire country.”

I respectfully suggest that everyone in the country has a computer at home, (source: http://www.leichtmanresearch.com/press/060707release.html 81% at least, which is enough to say all for any practical purpose), or access to one. Access to one is acheived via a library, and every town has one of those. While I don’t suppose that everyone is conversant enough in computers to use paperless billing, and online bill pay, as pointed to earlier, that is not the individuals only option.

“It is interesting that you completely ignore the valid example I gave by flippantly dismissing banking error as “easily fixable”. Spend some time at consumerist or just with google in general and you’ll see that this is not an easily fixable problem. With universal default a banking error at one institution can increase not only the APR on every credit card you hold, but it can also make it more expensive for you to get insurance and many other types of financial services, anyone that pulls a credit report will see that banking error, at least until it is fixed, which can take months sometimes. And just because you manage to get the original bank to fix the error, and reset your APR/late fees/whatever. Doesn’t mean every other entity you bank with will similarly change their rates back – the point is that it is not in the interest of the companies to do so.”

I did not mean to be flippant, or ignore it I meant to state that banking errors happen, and they are easily fixable. I have had many such errors happen to me, sadly and, even worse to friends and acquaintences who’ve had to deal with the ordeal of identity theft. If you have a bank error, you go into the branch, you talk to a teller, a bank manager, whoever is needed to get the error corrected, if this doesn’t work, you escalate calmly and quickly. Another solution to this being a source of not being able to make a payment on time (the original issue), I respectfully suggest that having only one bank/credit union/place to store money is foolish. Even if only a small amount for emergencies (which should cover such things as a credit card payment), should be in a different fiancial institution, whatever that institution may be.

You’re credit report shows you being behind 30, 60, 90, etc days on a payment. If this has been reported in error, you can put a statement on your credit report with all 3 bureaus, you can also dispute it with the credit bureau. This is generally sufficient so that it is not taken into account for things such as Insurance, other cards etc. What credit card companies are looking for are patterns of behavior that indicate a problem, not one explainable blip.

“…My experiences reading about the plight of people that have been royally screwed over by some of these predatory practices is what leads me to be so vocal about the issue.”

There are some bad practices, and they should be reformed. There are also ignorant consumers who should be educated. I think the edge cuts both ways on this one.

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