Now is the time to reform the credit card industry

Credit card companies, like any other business, should be allowed to make a profit, but increasingly these companies make money through the use of deceptive and misleading fees, interest recalculations, and fluid due dates.

Consumer rights groups have attempted to end these abusive practices for the last several years. Recently, a federal bill was unsuccessfully reintroduced to Congress that would seek the following remedies:

1) Prohibit late fees for on-time payments:
Believe it or not, many credit card companies are instituting late fees even when a payment is received as much as 21 days before its due date because the companies manipulate the “time for repayment” period. The new law would prohibit companies from manipulating these time periods.

2) Eliminate abuses in hidden (double-cycle) finance charges:
Many credit card companies essentially earn two finance charges on the same balance if the balance is paid during a grace period. This practice is usually hidden from the consumer and difficult to understand even when the consumer is aware of it.

3) Finally give consumers the power to control over-the-limit fees:
Consumers have never had the ability to instruct the credit card company to deny any transaction that would trigger an over-limit charge. This law would finally give consumers that ability.

4) Give cardholders timely notice of rate hikes:
Under the new law, credit card companies would have to provide consumers at least 45 days notice before increasing their interest rate so that the consumer could have time to find an alternative credit card provider.

5) Give cardholders greater cancellation rights:
The new law would give cardholders the absolute right to cancel the card when the interest rate has increased and prohibit the application of that interest rate hike when the account has been closed.

6) Give consumers greater control over their credit report:
Currently if you respond to a card solicitation based on a favorable promotional rate (0% APR, etc.) but then receive a card with far less favorable terms, that account will appear on your credit report even if you reject it immediately. The new law would give consumers the right to reject the credit card before that account appears on your credit report.

7) Limit out of control penalty fees:
Penalty fees have increased sharply in the past 10 years. These fees have increased far faster than the cost of living, some approaching $40. The new law would require that the amount of these penalty fees be reasonably related to the cost that a credit card companies incurs due to a late payment.

8) Eliminate unjustified rate hikes and other unfair contract clauses:
The new law would require credit card companies to be honest about the price of a card up front, rather than using bait and switch tactics and hair-trigger penalty rates to double or even triple the rate on debt that has already been incurred.

9) Protecting teenagers and young adults from being burdened with credit card debt for the rest of their lives:
Finally, the new law would address the large number of credit card companies that bait high school and college students with attractive promotions with the goal of getting them hooked on credit cards at a very young age. Under the new law credit card issuers would be unable to open an account for a consumer under the age of 21 unless the consumer has a responsible co-signer, can demonstrate ability to repay, or meets other criteria.

The Act is currently supported by to a variety of consumer groups that are dedicated to insuring fairness in the marketplace. The name of the law is the Credit Card Accountability, Responsibility and Reform Act, or Credit CARD Act. If this is an issue that interests you, please contact your representatives in Washington to urge them to support the Credit CARD Act.