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Information on mortgages, home equity loans, and consumer credit to help you use the power of financing to your advantage.
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Credit Cards > Consumer Protection
Law calls for card issuers to clearly disclose rates
MARCY GORDON, AP Business Writer. Associated Press.
Copyright Associated Press
WASHINGTON (AP) - You've seen the enticingly low "teaser" rates on envelopes offering new credit card accounts. But how long do the rates last, and what higher rates will replace them?
Legislation proposed Tuesday by Democratic lawmakers would require credit card companies to spell out that information more clearly and conspicuously.
The companies also would have to clearly disclose any conditions under which the introductory "teaser" rate may be revoked, such as failure to make monthly payments on time.
Credit card companies "are taking advantage of current law to hook new customers with misleading promotions and to encourage customers to carry increasing debt burdens," said Rep. John LaFalce of New York, the House Banking Committee's senior Democrat, who is the bill's chief sponsor.
"We are living in an age of 'buyer beware' in terms of credit cards," LaFalce said in a statement. "Card issuers have increased the number and amount of fees, shortened payment periods, and contrived hidden penalties that can readily double or triple interest charges."
About 20 House lawmakers, all Democrats, had endorsed the legislation, which also would put restrictions on new credit card accounts going to people under age 21. In addition, the bill would ban card issuers from canceling accounts of or imposing new fees on customers who pay off their monthly balances in full.
With personal bankruptcies continuing to soar, lawmakers of both parties last week began pushing legislation backed by credit card companies that would make it harder for people to erase their debts in bankruptcy court.
LaFalce's bill could eventually be attached to the bankruptcy overhaul legislation, as happened last year, when the House passed such legislation. The Senate adjourned last year without voting on the measure.
Opponents of a sweeping rewrite of the bankruptcy laws, including consumer groups, insist that the credit card networks, and the banks that control them, share the blame for mounting debt by aggressively mailing millions of solicitations to entice consumers.
Despite the strong economy, the number of Americans filing personal bankruptcies last year reached a record 1.4 million, up more than 300 percent since 1980.
Big credit card networks, notably Visa and MasterCard, and retail-business groups have said their losses from forgiven debts in bankruptcy have forced them to raise interest rates for consumers who handle credit responsibly.
Michael McGarry, a spokesman for Visa USA Inc., said the information the card issuer provides to consumers concerning fees, interest rates and other terms already is adequate.
Rep. George Gekas, R-Pa., principal sponsor of the legislation to overhaul the bankruptcy laws, wasn't immediately available for comment on the Democrats' credit card proposals.
The LaFalce bill also would:
-Require card issuers to spell out in billing statements how long it would take customers to pay off their debt, and the total cost including interest, with only minimum monthly payments.
"Minimum payments are the nicotine" of the credit card industry, said Mary Rouleau, legislative director of the Consumer Federation of America. "They should carry proper warnings."
-Require that credit card solicitations on the Internet include "clear and conspicuous" disclosures of terms and costs.
-Prohibit card issuers from mailing unsolicited cards with multiple purposes, such as telephone calling cards and debit cards, that also can be used to obtain credit. Federal law prohibits unsolicited mailings of usable credit cards, and the bill's sponsors maintain that such multi-purpose cards are sometimes used to get around the restriction.
-Require card issuers to clearly disclose any fees and interest rates related to use of so-called "convenience" checks they provide to customers for payment to third parties.
Reproduced with permission of the copyright owner. Further reproduction or distribution is prohibited without permission.
People: LaFalce, John J
Text Word Count 591
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