May 2009

 

"Will that be cash or charge?"

 

A few weeks ago, as Congress was considering the Credit Cardholder Bill of Rights, I asked Hawaii residents to share some of their experiences with credit card companies. Within a day, I received 32 responses. Most were similar to these:

When I checked my monthly statement, I noticed that my interest rate had been raised from 10% to a 25% APR. I had not missed any payments, nor did I go over my credit limit . . . I could not believe that something like this could be legal. A 150% increase!

The bank jacked up my interest rate from 9.99% to 25.5% and the only notice was an insert in my bill that could easily have been mistaken for an advertisement.

I always pay my bill ahead of time. However, recently I paid my credit card bill on the due date. But , because I live in Hawaii, I missed the 4pm EST cutoff and charged me a $35 late fee and my interest rate was hiked for one month. Altogether, it cost me an additional $135.

 My wife and I are both military veterans. Now we are both students at the University of Hawaii, as well as new parents. After we went from being a full-time Marine and Sailor to full-time students, we slowly racked up credit card debt. Now, I’m worried that I may have to drop out of college and get a construction job just to make ends meet.

Today, credit card debt in the U.S. has reached a record high — nearly $1 trillion. Almost half of American families carry a balance. At the end of 2008 , the average household credit card debt was $10 ,679. One-fifth of those carrying credit card debt pay an interest rate above 20 percent.In 2008 , credit-card issuers imposed $19 billion in penalty fees.

This isn’t supposed to happen , but it does , and to millions of people , whether or not they pay their bills on time; whether or not they have perfect credit. To put a stop to it , Congress just passed and sent to President Obama the Credit Cardholders Bill of Rights , legislation I was proud to cosponsor.

The Credit Cardholders Bill of Rights protects consumers from unfair credit card company practices , such as retroactive interest rate hikes on existing balances , double-cycle billing , and due-date gimmicks. It bans most interest rate increases on existing balances and requires 45 days notice before interest rate hikes go into effect on new purchases. It requires that monthly bills be sent at least 21 days before the payment due date; prohibits charging fees to pay a bill by phone , mail or online; bans over-the-limit fees , unless a consumer agrees in advance; bans due-date tricks; prohibits interest charges on balances that are paid on time , a practice known as double-cycle billing; requires payments to be applied fairly to the highest interest rate balance first; and strengthens credit card protections for young people.  

Almost all of us use credit. It keeps us from having to walk around with pockets full of cash , and makes things like online shopping possible. Used responsibly , credit cards are a useful and convenient part of our lives. But the relationship between the credit card company and credit card user is supposed to be based on clear and fair policies.

Most families are doing everything they can to get out of debt. To do that, you have complete information to manage your finances. You deserve to be treated fairly and honestly by your credit card companies. Our country will never get out of the current financial situation if American families are stuck on a credit treadmill and can’t improve their financial situation. The Credit Cardholders Bill of Rights levels the playing field between credit card companies and consumers.

 

Aloha,

Neil Abercrombie

Member of Congress

 

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