New Bill Takes Aim at Credit Card Companies
By Justin McHenry
A bill introduced this week in Congress is attempting to legislate what credit card companies can and can’t do when it comes to the rates and fees they charge their customers.
Democratic Senators Carl Levin of Michigan and Claire McCaskill of Missouri are targeting a number of practices that lawmakers have said confuse consumers or are unduly harsh. Among the mandates the proposed law would include:
- Interest rate hikes due to late payments could not rise more than 7 percentage points above the current rate.
- Require interest rate increases to apply only to debt incurred after the rate hike, not to existing balances charged when rates were lower.
- Require payments to apply to the portion of the balance with the highest interest rate.
- Ban “universal default,” the practice of hiking interest rates on a customer who is late on a bill unrelated to the credit card.
Several credit card issuers have introduced more customer-friendly policies recently, perhaps with the hope of keeping Congress from more closely regulating the industry. Chase recently ended its practice of two-cycle billing, which had allowed them to charge interest on a previous month’s balance, even if most of it had been paid off. Citi ended its policy that gave it the right to hike rates at any time for any reason, saying it would only do so for habitual late payers or when cards were up for renewal.
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