Levin Committee Opens Hearings On Credit Card Interest Hikes
Powerful Senator Carl Levin (D-MI) opened Senate hearings today that put credit lending giants on notice that sudden rate hikes would soon come under greater scrutiny.
Levin chairs the Subcommittee on Investigations under the Homeland Committee and criticized the industry from the credit bureaus to the credit lenders for a lack of transparency in the process. Citing multiple examples in which the interest rate on a consumer's credit card could suddenly and retroactively increase, Levin announced that the Subcommittee would review the process.
Using the occasion to describe legislation he has been co-sponsoring with Senator McCaskill (D-MO) almost all year, Senator Levin said, "When a credit card issuer promises to provide a cardholder with a specific interest rate if they meet their credit card obligations, and the cardholder holds up their end of the bargain, the credit card issuer should have to do the same."
Amen.
The Michigan senator referred to the mysterious FICO credit scores many lenders use to determine interest rates and said that he would advocate that the underlying data used to generate those scores be kept so that a consumer could challenge an increase. Consumers currently are advised of an increase, but Levin said that many are unaware of the increase's trigger, including spending within an individual account's limit, but at a higher percentage of that limit.
Senator Levin chastised lenders and called the practice "offensive".
We think this is the first step in more transparency to credit reporting laws, a long overdue overhaul of how lenders operate now. We certainly don't expect lenders to issue credit to bad credit risks and we respect a lender's light to charge a premium interest rate to protects itself when granting credit to consumers with poor credit.
But full disclosure in plain English with no retroactive increases makes sense to us too. And if someone is issued a credit limit by a lender, their interest rate on another account shoudn't rise if the consumer spends that money. Credit is a privilege, not a right, but consumers ultimately pay for that privilege through interest, card fees and higher prices when merchants have to keep prices higher rather than absorb the fees credit card companies charge
them for each transaction.
Cheers to Carl Levin. Read up on
S. 1395, (pdf file) and call your own Senator about signing on to the bill. This is a good one.
Labels: credit, Levin, McCaskill
Levin, McCaskill Lead Charge On Credit Card Protections
Two US Senators, Carl Levin (D-MI) and Claire
McCaskill (D-MO) have introduced a bill that will help protect consumers against aggressive credit card practices. Especially targeted in the proposed legislation is the ability to raise rates on one account if an account at another entity is paid late.
"Lenders have a legitimate concern if someone is not properly managing their credit, but once credit is granted, that concern needs to be limited to the consumer's relationship with the lender, not continually re-evaluated," said Consumer Help Web President Joan
Bounacos. "Making a late payment on a single credit card is not good, but should not cause other lenders to automatically raise rates. That's a poor excuse to take advantage of a consumer who is already having trouble."
Multiple consumer advocates endorsed the legislation, known as "The Stop Unfair Practices in Credit Cards Act". The bill's other protections are also consumer friendly:
Interest Rates * 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.
* No Trailing Interest. Prohibit added interest charges on credit card debt which the card holder paid on time and in full.
* Limits on Penalty Interest. Prohibit interest rate hikes on a credit card account unless the card holder agrees to them at the time, and in any event, limit penalty interest rate hikes to no more than a 7% increase.
* Apply Interest Rate Increases Only to Future Debt. Require increased interest rates to apply only to future credit card debt, and not to debt incurred prior to the increase.
Credit Card Fees * 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, and allow such fees to be charged only when a card holder’s action, rather than a penalty, causes the limit to be exceeded.
* No Pay-to-Pay Fees. Prohibit charging a fee to allow a credit card holder to make a payment on a credit card debt, whether payment is by mail, telephone, electronic transfer, or otherwise.
* Reasonable Currency Exchange Fees. Require currency exchange fees to reasonably reflect the credit card issuer’s actual costs.
Other Protections * Prompt and Fair Crediting of Card Holder Payments. Require consumer payments to be applied first to the credit card balance with the highest rate of interest, and to minimize finance charges. Prohibit late fees if the card issuer’s action caused the delay in crediting a payment.
* Fixed Credit Limits. Require that card issuers must offer consumers the option of having a fixed credit limit that cannot be exceeded.
“Credit card issuers too often sock consumers with sky-high interest rates and excessive fees, making it harder and harder for families to climb out of debt,” Levin said. “The goal of this legislation is to put an end to unfair and abusive credit card practices that outrage so many American families. I’m afraid these practices have become too entrenched and too profitable to the credit card companies for the companies to change them on their own. Congress needs to enact pro-consumer legislation to put an end to these unfair practices.”
Labels: Bounacos, credit, legislation, Levin, McCaskill
