Tester’s credit card reform clears hurdle
Bill bans abusive credit card practices as ‘Montanans get squeezed’
(WASHINGTON, D.C.) – A powerful Senate panel has signed off on legislation banning abusive practices by the nation’s credit card issuers—a move Senator Jon Tester says will help restore “common sense and honesty” to the industry.
The measure approved today by the Senate Banking Committee is called the Credit Card Accountability Responsibility and Disclosure Act, also known as the Credit CARD Act.
The measure includes language by Tester to outlaw the practice of universal default. Universal default is when credit card companies change terms (such as raising interest rates) on customers if their credit scores fall for any reason—even if those customers pay their credit card bills on time.
“This legislation puts common sense and honesty back into the credit card industry,” said Tester, who serves on the Senate Banking Committee. “Too many Montanans have been getting ripped off by the credit card industry and that’s not the way Montanans do business. This bill will establish a new set of standards at a time when hardworking, honest folks are getting squeezed by this tough economy.”
In addition to banning the practice of universal default, the Credit CARD Act also:
- Protects customers who pay their bills on time. The Credit CARD Act outlaws interest charges on debt paid on time. The measure also gives customers another week to pay their monthly bills (it requires credit card statements to be mailed three weeks before the bill is due rather than the current two weeks).
- Limits fees and penalties. The legislation outlaws interest on transaction fees (such as late fees and over-limit fees). It also prohibits companies from charging fees for customers who pay their credit card bills via phone, over the internet, or by mail.
- Ensures that cardholders know ‘the small print.’ The Credit CARD Act requires companies to give customers 45 days’ notice of any interest rate increase. It also requires companies to let customers know of changes when they renew a credit card.
- Protects young Americans from credit card solicitors. The legislation requires most credit card applicants under the age of 21 to get a signature from someone willing to take responsibility for the debt (such as a parent). It also limits credit card offers to customers between the ages of 18 and 21.
“I believe in personal responsibility, but I also believe in honest, fair business practices,” Tester said. “Credit cards are a fact of life in Montana and across America. There’s no room for abuse in the industry.”
Tester’s legislation banning universal default is S. 399. Text of the legislation is available online HERE.
The Credit CARD Act now goes to the full Senate for approval.