Credit Cardholders’ Bill of Rights Reintroduced
Jan 15th, 2009 | By Rob | Category: Government
The Credit Cardholders’ Bill of Rights was reintroduced into Congress today. It will be interesting to see how the bill develops, since it was already passed by the House of Representatives last year (it did not pass the Senate), and the Federal Reserve will enforce regulations in 2010 that mimic many of the provisions of the bill.
The only substantive change mentioned in the two newspaper articles covering the Credit Cardholders’ Bill of Rights was that it now calls for credit card companies to implement the measures 90 days after the signing of the bill. Before the Federal Reserve stole Congress’ thunder on the issue, the bill required credit card companies to comply with the regulations within one year of the signing of the bill.
I hope that Congress steps up to the plate and either strengthens the credit card protections provided by the Federal Reserve or drops the bill and focuses on other legislation to aid consumers. If our Congressional representatives do little more than codify that credit card companies must comply with the Federal Reserve regulations sooner, they will be squandering an opportunity to completely rewrite the rules for credit card company and consumer interactions for the future. While the Federal Reserve credit card regulations will benefit consumers, there are still plenty of loopholes for Congress to close and protect consumers from the predatory and deceptive practices of credit card issuers. I’d much rather see our representatives debate increasing consumer protections through establishing best practices for credit card companies than create a compromise over how quickly banks can comply with the Federal Reserve regulations.
One issue that neither Congress nor the Federal Reserve has currently addressed is the issue of rising credit card defaults and debt forgiveness. The earnings reports of J.P. Morgan Chase and Capital One Financial for the fourth quarter both suggest that chargeoffs on credit card debt will hit 8 percent in the near future. Congress should find a way to step in now to protect both lenders and borrowers before another credit crisis develops.
Banks have the Federal Government backstopping them for their poor lending practices. Congress has been working on protecting homeowners from foreclosure for over a year. It is time that Congress get out ahead of the coming credit card debt crisis. The Federal Reserve regulations don’t do it. And the result would be much more beneficial to the country than a “bill of rights” which merely speeds up the inevitable.
Other issues that I might like Congress to add:
- Limits on the maximum interest rate which can be imposed (usury laws);
- Rules governing reductions in the available balance on consumer credit cards;
- Additional protections against debt collection practices;
- New rules on the marketing of credit cards.
If our congressional representatives waded through the public comments received by the Federal Reserve about credit card practices, I’m sure that they would have more than enough ammunition to create legislation worthy of being labeled a “bill of rights”. Until such time as they do, I don’t think the bill is worthy of its name.
