The Credit CARD Act and the Credit Cardholders Bill of Rights

Above, watch our video about credit card solicitations on college campuses.  The Credit CARD Act addresses such targeting, while the Credit Cardholders Bill of Rights does not.  (See the original, less polite version of the video here.)

On March 31, the Senate Banking Committee voted to approve S. 414, the Credit CARD Act.  Two days later, on April 2, the House Financial Institutions and Consumer Credit Subcommittee voted to approve H.R. 627, the Credit Cardholders Bill of Rights.  Next, the Credit CARD Act will head to the full Senate for a vote, and the Credit Cardholders Bill of Rights will be addressed by the full House Financial Services Committee and then (hopefully) the full House.  If both are passed, they will be reconciled in a joint Senate/House Committee.  Read more about the legislative process here.

The Senate’s bill would go into effect 9 months after passage, whereas the House bill would go into effect either one year from passage or on July 1, 2010, whichever comes first.  Either timeframe is too long – click here to ask Congress to speed up the implementation process.

In general, the Senate bill does a better job of protecting consumers.  Here’s how the two stack up:

Both Bills Would:

• Ban Double-Cycle Billing,
• Require issuers to mail bills at least 21 days before the due date, and
• Prevent issuers from charging a late fee if payment was mailed at least 7 days before the due date.

In addition, the Senate’s Credit CARD Act would:

• Eliminate “retroactive” rate increases, where an issuer increases the interest rate on existing credit card balances,
• Eliminate “universal default,” where an issuer raises interest rates because of something other than the cardholder’s performance on that card (for example, making a late payment on a different credit card),
• Require that payments are allocated first to the balance with the highest interest rate,
• Mandate that penalty fess be reasonably related to costs, and
• Limit aggressive marketing, and irresponsible lending, to young consumers without the ability to repay debt.

The House’s Credit Cardholders Bill of Rights addresses some of these issues, but does not go quite as far in protecting consumers.  For example, it would prohibit retroactive rate increases in some but not all circumstances, and would require that payments are allocated either proportionately across all a cardholders’ balances, or are allocated to the highest balance first.

For more information, see:

• This previous blog post about the Senate’s Credit CARD Act
• AFFIL and our Partners’ letter to Congress about the Senate Credit CARD Act (PDF)
• AFFIL and our Partners’ letter to Congress about the House Credit Cardholders Bill of Rights (PDF)
• Congressional Testimony about the House Credit Cardholders Bill of Rights (PDF), delivered by Travis Plunkett of the Consumer Federation of America on behalf of  AFFIL and eleven other groups
• Senator Dodd’s summary of the Senate Credit CARD Act
• Representative Maloney’s summary of the House Credit Cardholders Bill of Rights