Over the past few months, nearly 1,000 of you joined us in fighting for credit card company reform by participating in our action to send a letter to the Federal Reserve Board telling them to adopt their proposed rules to regulate the credit card industry. Those rules would ban some of the worst practices of credit card companies, like retroactive rate increases, arbitrary due dates and hours, and forcing you to pay down your least expensive debt first. The Fed’s comment period is now closed, and their decision is expected later this year. Thank you to the Qvisory community for your support of this action!
Meanwhile, there are new developments in the effort to regulate credit card companies. Last week, Representative Carolyn Maloney’s (D-NY) Credit Cardholders’ Bill of Rights (HR 5244) passed the House Financial Services Committee. This was a major hurdle for an important bill.
The Credit Cardholders’ Bill of Rights bans all the same abusive practices that the Fed’s rules do and adds some other important restrictions. For example, the bill regulates the availability of sub-prime credit cards, puts a cap on over-the-limit fees, and allows cardholders to set their own credit limits that cannot be exceeded. The bill also gives Congress more oversight over the credit card industry.
This bill is crucial because it would make the Fed’s proposed rules (and the added restrictions) law. Assuming it adopts them, the Fed could still withdraw its rules at any time in the future, but laws are much more permanent and powerful. Want evidence? At last week’s hearing about the Maloney bill, bank-backed members of Congress tried to substitute a resolution supporting the Fed’s proposed rules instead of the even-stronger Maloney bill. Although the Fed’s regulations are important, the Maloney bill is now a crucial next step towards making these changes permanent by law.
Along with the bill, Maloney released a report titled Forever in Debt: Anti-Competitive Credit Card Practices and Their Impact on the Economy. The report details the ways in which credit card industry practices mirror the sub-prime mortgage industry. Like sub-prime mortgage lenders, the credit card industry pushes sub-prime cards and securitizes the debt, a complicated process that was central to the collapse of the housing collapse earlier this year. The report says, “Credit card company practices will compound households’ financial distress and push them into bankruptcy. The effects of greater indebtedness will spill over into the broader economy, as families divert more of their income to servicing their debt instead of boosting the economy with new purchases.” It concludes, “Another financial crisis due to inadequate regulations is looming.”
This stark warning shows how crucial the Credit Cardholders’ Bill of Rights is. Yesterday, the House Financial Services committee took a huge first step by passing the bill. Next up: a full House vote.
Qvisory is following these developments closely. Watch for upcoming opportunities on our site to Take Action to help pass this important legislation.
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