The Subcommittee on Financial Institutions and Consumer Credit of the House Financial Services Committee held a hearing on credit card reform. More than half of the 15 witnesses who testified, including FDIC Vice Chairman Martin Gruenberg, endorsed H.R. 5244, the Credit Cardholder’s Bill of Rights Act of 2008. H.R. 5244 would amend the Truth in Lending Act and Regulation Z to allow cardholders to opt-out of rate increases; prohibit retroactive rate increases on existing balances; prevent “universal default” rate increases; bar creditors from changing any term of the contract until contract renewal; require payments to be allocated proportionately among balances with different rates; restrict the frequency of overlimit fees; ban the two-cycle method of calculating finance charges; require statements be mailed 25 days before due dates; and require statements to provide information on obtaining the payoff balance. While acknowledging some industry practices may need to be changed, credit card issuers that testified warned that the bill could have the unintended consequences of making credit less available and more expensive. Click here for a copy of H.R. 5244.
Alert April 22, 2008