Credit Cardholders' Bill of Rights Act of 2008

The Credit Cardholders' Bill of Rights Act of 2008 (H.R. 5244) would have instituted a series of reforms of the credit card industry, including limits on when and how companies can increase interest rates, changes in billing practices, and the clarification of terms like "fixed rate" and "prime rate." It passed the House in September 2008 but did not come to a vote in the Senate.

Summary


As summarized by the bill's main sponsor, Rep. Carolyn Maloney (D-NY), the bill would have done the following:


 * Ends Unfair, Arbitrary Interest Rate Increases.
 * Prevents card companies from unfairly increasing interest rates on existing card balances – retroactive increases are permitted only if a cardholder is more than 30 days late, if a pre-agreed promotional rate expires, or if the rate adjusts as part of a variable rate.
 * Requires card companies to give 45 days notice of all interest rate increases so consumers can pay off their balances and shop for a better deal.
 * Lets Consumers Set Hard Credit Limits, Stops Excessive “Over-the-Limit” Fees.
 * Requires companies to let consumers set their own fixed credit limit.
 * Prevents companies from charging “over-the-limit” fees when a cardholder has set a limit, or when a preauthorized credit “hold” pushes a consumer over their limit.
 * Limits (to 3) the number of over-the-limit fees companies can charge for the same transaction – some issuers now charge virtually unlimited fees for a single limit violation.
 * Ends Unfair Penalties for Cardholders Who Pay on Time.
 * Ends unfair “double cycle” billing – card companies couldn’t charge interest on debt consumers have already paid on time.
 * If a cardholder pays on time and in full, the bill prevents card companies from piling additional fees on balances consisting solely of left-over interest.
 * Requires Fair Allocation of Consumer Payments.
 * Many companies credit payments to a cardholder’s lowest interest rate balances first, making it impossible for the consumer to pay off high-rate debt. The bill bans this practice, generally requiring payments to be allocated proportionally to balances that have different rates.
 * Protects Cardholders from Due Date Gimmicks.
 * Among other measures, requires card companies to mail billing statements 25 calendar days before the due date (up from the current 14 days), and to credit as “on time” payments made before 5 p.m. local time on the due date.
 * Prevents Companies from Using Misleading Terms and Damaging Consumers’ Credit Ratings.
 * Establishes standard definitions of terms like “fixed rate” and “prime rate” so companies can’t mislead or deceive consumers in marketing and advertising.
 * Gives consumers who are pre-approved for a card the right to reject that card prior to activation without negatively affecting their credit scores.
 * Protects Vulnerable Consumers From High-Fee Subprime Credit Cards.
 * Prohibits issuers of subprime cards (where total yearly fixed fees exceed 25 percent of the credit limit) from charging those fees to the card itself. These cards are generally targeted to low-income consumers with weak credit histories.
 * Bars Issuing Credit Cards to Vulnerable Minors
 * Prohibits card companies from knowingly issuing cards to individuals under 18 who are not emancipated minors.

Bill consideration
The bill was introduced in the House on February 7, 2008 and sponsored by Rep. Carolyn Maloney (D-NY) and 155 co-sponsors. It passed the House on September 23, 2008 by a vote of 312-112.



The bill was referred to the Senate Committee on Banking, Housing, and Urban Affairs, but was never brought to a vote before the full Senate before the end of the 110th Congress.

Support and Opposition
Supporters of the bill included:
 * Center for Responsible Lending
 * Consumer Action
 * Consumer Federation of America
 * Consumers Union
 * National Small Business Association
 * Service Employees International Union (SEIU)
 * U.S. Public Interest Research Groups

Opponents included:
 * American Bankers Association
 * American Express Company
 * American Financial Services Association
 * Citi Cards
 * Consumer Bankers Association
 * Discover Financial Services
 * Financial Services Forum
 * Financial Services Roundtable
 * Independent Community Bankers of America
 * National Association of Federal Credit Unions
 * National Association of Manufacturers
 * U.S. Chamber of Commerce

Related legislation
Rep. Carolyn Maloney (D-NY) has introduced similar legislation in the 111th Congress as the Credit Cardholders' Bill of Rights Act of 2009 (H.R. 627).

External resources

 * H.R.5244, 110th Congress, at THOMAS.
 * Credit Cardholder's Bill of Rights: Leveling the Playing Field at Rep. Carolyn Maloney's (D-NY) House Web site.
 * H.R.5244 - Credit Cardholders' Bill of Rights Act of 2008 at MAPLight.org.

External articles

 * Adam Levitin, "The Credit Cardholders' Bill of Rights", Credit Slips, February 25, 2008.
 * Edward L. Yingling, "H.R. 5244 is wrong way to regulate credit card industry", The Hill, letter posted April 16, 2008.
 * David Lazarus, "Banks love bailout, hate credit card curbs", Los Angeles Times, September 28, 2008.