Stop Unfair Practices in Credit Cards Act Proposed

15 May Stop Unfair Practices in Credit Cards Act Proposed

Not a catchy title? It should be music to your ears.

Senators Carl Levin (D-Mi) and Claire McCaskill (D-Mo) have proposed the first substantial legislation to protect consumers from credit card lending practices in years. The Stop Unfair Practices in Credit Cards Act would help consumers who are trying to pay their debts back from being slammed by some of the most outrageous practices the credit card industry has developed over the last few years.

The bill amends the federal Truth in Lending Act (TILA). But before you doze off immediately — I know, TILA makes me sleepy too! — read on and see if you don’t adore this lovely melody.

The new law would prevent a credit card lender from charging interest on any part of a balance paid on time or on a balance paid in full, on time. This would eliminate the mysterious “double-cycle” billing you may have seen mentioned in some of your credit card agreements and which costs you substantially more than you thought you would ever have to pay for that latte you put on your credit card six months ago.

You already won me over, Senators. But it gets better. The amendment would eliminate penalty interest increases — you know, the ones where you get a triple rate increase because you were a couple days late with a payment ? — of more than 7% and only if you agreed to the new interest rate. Why you would ever do so, unless they were making you a deal, I don’t know. But that’s the point isn’t it? To give consumers some right to get off the merry-go-round before they are destitute?

The Levin-McCaskill bill would require that interest rate increases would apply only to new balances incurred. So if you stop using the card and want to simply pay it off, you have a fixed target to work with.

Levin-McCaskill would bar interest being charged on fees, like over-limit and late fees. That would make the fee actually a fee, not the equivalent of a small increase in your interest rate each time one is incurred.

The bill also restricts over-limit fees so that the added fee doesn’t itself trigger another over-limit fee, and so on and so on, pyramiding out of sight. And it restricts over-limit fees to situations where you actually charge a balance over the card’s credit limit — not a fee penalty that drives you over the credit limit.

Speaking of credit limits, the bill would also require card issuers to offer a true credit limit option. Meaning that your credit card could have a real, we-mean-it limit on your credit line. Any charges over the limit would be declined. So you would not trigger an over-limit fee. And neither would your kids or family members if you got them a “low limit” card to shop or to learn to manage credit with. And you couldn’t break it either, if you happen to have shopaholic issues.

I quote with pride the statement by my home state Senator, Claire McCaskill: “Credit card companies must be stopped from preying on the most vulnerable Americans with unfair and confusing practices. We have to fight for those who have not hired dozens of lobbyists to make sure that American consumers are not getting ripped off and are fully informed of how these companies are manipulating their financial security.”

The bill, if it becomes law, would cut down on the number of people who might have to file bankruptcy — and I bet every bankruptcy lawyer who contributes to this Network would be happy to lose the business. Yet every credit card issuer in the country is likely to actively or quietly fight this bill. Who should support it? Every credit card holder, in debt or not. A voice and a vote can change the world.

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I have been a bankruptcy attorney since 1989. Our firm represents consumers filing bankruptcy almost exclusively, although I have represented bankruptcy trustees as well as creditors. For 2017-2018 I am also serving on the American Bankruptcy Institute's Commission on Consumer Bankruptcy. If you live in Eastern Missouri, visit our website, send an e-mail or give us a call (314) 781-3400. Our website: STLBankruptcy.com
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