Levin Cosponsors Comprehensive Credit Card Legislation

WASHINGTON – Citing continuing serious abuses by credit card companies against consumers, Senator Carl Levin, D-Mich., today joined with Senator Chris Dodd, D-Conn., chairman of the Senate Banking, Housing and Urban Affairs Committee, and other senators in introducing legislation to rein in some of the most egregious practices. The Credit Card Accountability, Responsibility and Disclosure Act or Credit CARD Act of 2009 offers a comprehensive approach to protecting consumers from unfair credit card practices.

“It is urgent in these hard economic times to protect American families and businesses from abusive credit card practices,” Levin said. “Our bill would not only help protect consumers and stop the abuses, but also make certain that credit card companies willing to do the right thing are not put at a competitive disadvantage by companies continuing unfair practices.”

As chairman of the Permanent Subcommittee on Investigations, Levin has examined credit card practices for several years. In two investigative hearings in 2007, Levin pulled the curtain back on some of the more outrageous credit card abuses such as imposing interest rates as high as 32 percent, charging interest for debt that was paid on time, hiking interest rates for consumers who pay on time, and applying higher interest rates retroactively to existing credit card debt.

“Credit cards are being used to pay for groceries, mortgage payments, even taxes,” Levin said. “Due to abusive practices, credit cards are also saddling U.S. consumers, from college students to seniors, with a mountain of debt. Too many American families are being hurt by too many unfair credit card practices to delay action any longer.”

Federal banking regulators recently issued a new regulation to curb some unfair credit card practices, but this regulation falls far short of stopping all the abusive practices addressed in the Dodd-Levin bill. In addition, legislation is needed to provide a statutory basis for the regulation and ensure it cannot be weakened in the future.

Key provisions of the Dodd-Levin bill include:

• Universal Default Prohibition. Prohibit credit card issuers from increasing interest rates on cardholders in good standing for reasons unrelated to the cardholder’s behavior with respect to the affected credit card.

• No Interest on Debt Paid on Time. Prohibit interest charges on any portion of a credit card debt which the card holder paid on time during a grace period.

• 45-Day Notice. Require 45-day notice to impose a higher interest rate.

• Higher Interest Rates Only for Future Debt. Require higher interest rates to apply only to future credit card debt, and not to debt incurred prior to the increase.

• No Interest on Fees. Prohibit the charging of interest on credit card transaction fees, such as late fees and over-the-limit fees.

• Restrictions on Over-Limit Fees. Prohibit the charging of repeated over-limit fees for a single instance of exceeding a credit card limit.

• No Pay-to-Pay Fees. Prohibit charging a fee to allow a payment on a credit card debt, whether the payment is by mail, telephone, electronic transfer, or otherwise.

• Fair and Prompt Crediting of Card Holder Payments. Require payments to apply first to the credit card balance with the highest rate of interest, and to minimize finance charges.

• Fixed Credit Limits. Require credit card issuers to offer consumers the option of operating under a fixed credit limit that cannot be exceeded.

• Interest Rate Decreases. Require card issuers to lower penalty interest rates imposed on cardholders after 6 months, if no further violations occur.

• Stopping Unfair and Deceptive Practices. Give each federal banking agency the authority to issue regulations prohibiting unfair or deceptive practices.

• Improved Disclosures. Require credit card issuers to disclose the period of time and total interest needed to pay off a card balance if only minimum monthly payments are made, and require other enhanced disclosures.

• Fair Billing Practices. Require credit card issuers to issue bills 25 days before the due date and accept payments postmarked one week before the due date.

• Protections for Young Consumers from Credit Card Solicitations.
  • Require card issuers soliciting persons under the age of 21 to obtain the signature of a parent, guardian, or other individual who will co-sign for the debt; proof the applicant can independently repay the debt; or proof the applicant has completed a certified financial literacy course.
  • Prohibit credit bureaus from furnishing credit reports for consumers under age 21, unless the consumer initiates the request. Allow consumers at least 18, but not yet 21, to choose to receive card solicitations.