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Tuesday, September 23, 2008

“Credit Card Bill of Rights” Passes One Hurdle

FOXBusiness

The House of Representatives passed a so-called Bill of Rights Tuesday for American credit card holders, which now sends the legislation on to the Senate.

This is seen as a move to protect “Main Street” families who are facing unfair practices in the credit card industry, according to a statement issued by Speaker of the House Nancy Pelosi (D-Calif.).

The bill will prevent credit card companies from increasing interest rates on customers’ existing credit card balances. Interest rate increases are allowed only after a cardholder is late beyond 30 days. Credit card companies must now notify customers of increases in interest rates 45 days beforehand, and companies can no longer perform “double cycle” billing, which would charge customers interest on a bill they have already paid.

The bill also states that credit card companies can no longer use “misleading” terms in their advertising campaigns and establishes set definitions of terms including “prime rate” and “fixed rate.”

Credit card companies will also be banned from issuing cards to children under the age of 18 who are not emancipated minors.

U.S. credit card debt is higher than ever, at almost $1 trillion, and the average credit card debt per household at $9,840 as of 2007. This is up approximately threefold from where it was in 1990.

In 2007 alone, credit card issuers earned $18.1 billion in penalty fees for overdue credit card payments and balances. This figure was up more than 50% since 2003. It is estimated that in 2008, credit card companies will earn over $19 billion in profit.