Credit Cardholders’ Bill of Rights Summary

The so-called “Credit Cardholders’ Bill of Rights” has been inching its way closer to President Obama’s desk, so let’s take a look at what it includes to protect consumers from the mighty credit card issuers.

By the way, Manhattan Congresswoman Carolyn Maloney has great coverage of the bill’s path to becoming law, as well as access to the accompanying documents in their entirety.

No More Unfair, Arbitrary Interest Rate Increases

For some reason, credit card issuers seem to think they can raise our interest rates for any reason they so choose, even if we pay on time and maintain a low risk profile.

If this bill becomes law, companies will be required to give 45 days notice of all interest rates increases so consumers have time to either pay off their balances or shop for a better deal.

And card issuers will only be allowed to retroactively increase interest rates if the cardholder is more than 30 days late, if a promotional rate expires, or if the rate is variable.

Consumers Can Set Their Own Credit Card Limits

It would also require companies to let cardholders set their own fixed credit limit and would prevent card issuers from charging over-the-limit fees when said cardholder sets their own limit, or if a preauthorized credit “hold” pushes a consumer over their limit.

Additionally, it would limit the number of over-the-limit fees companies can charge for the same transaction to three instead of the current unlimited figure.

Ends Double-Cycle Billing

Learn more about this controversial practice here.

Eliminates Negative Payment Hierarchy

The bill would ensure that cardholder payments are distributed proportionally to balances that have different interest rates, rather than going to the lowest interest rate balances first, a practice that clearly traps the consumer unfairly.

Cuts Out Due Date Nonsense

It would require credit card issuers to mail billing statements 25 calendar days before the due date, up from 14 days, and credit as “on time” payments made before 5pm local time on the due date.

Protect Minors from Credit Card Exposure

It would prohibit companies from knowingly issuing credit cards to minors under the age of 18 unless they are legally emancipated from their parents.

Clears Up Misleading Terms and Protects Consumers’ Credit Ratings

The bill establishes standard definitions for terms like “fixed rate” and “prime rate” so companies can’t mislead or deceive consumers in marketing and advertising materials.

Additionally, consumers will be given the choice to approve or reject a pre-approved credit card without negatively impacting their credit scores.

Protects Consumers from High-Fee Subprime Credit Cards

Prohibits issuers of subprime credit cards (those where total yearly fixed fees exceed 25 percent of credit limit!) from charging the fees on the credit card itself.

This is a good start, I suppose, but it’ll only be a matter of time before credit card issuers come up with ways to circumvent the new rules and charge borrowers new fees to keep profits up.

These rules wouldn’t go into effect until summer 2010…until then you’re on your own.

Related Topics:

1. U.S. Senate Subcommittee Members Slam Credit Card Issuers
2. Credit Card Interest Rates May be Capped at 16 Percent
3. Credit Card Issuers Promoting Fixed Rates as Prime Set to Move Lower
4. Keep an Eye on your Credit Card Automatic Bill Pay
5. Credit Card Act II