A Brief Summary of the Proposed Credit Card Reforms

[Anonymous]

http://www.creditbloggers.com/2007/03/a_brief_summary.html

Those of us in the consumer finance and credit education world continues to rejoice at the news that credit card issuers are being investigated for their unfair fee and rates policies. The current panel hearing led by Senator Carl Levin is asking some long overdue tough questions! Not to be mean spirited, but it is nice to see the credit card issuers sweating a little bit about having to explain their treatment of consumers!

There are a lot potential reforms being tossed around in relation to this senate hearing. A group of consumer advocacy organizations including Consumer's Union and USPIRG, issued a press release calling for the following:

• Banning the Universal Default Clause
• Limits on credit card fee amounts and frequency
• Requiring creditors to verify repayment ability for new customer
• Limits on marketing to students and teens
• Limits on the amount creditors can collect in bankruptcy filings
• Ban on retroactive interest rate increases
• No more "any time, any reason" rate change policies
• Policy change to accept payments as on time by postmark date instead time received
• Stop roll-over of over-limit fees from month to month
• No over-limit fees for transactions approved by the credit card issuer
• Clarification of "invitation to apply" offers that imply pre-approval.
• Simplification of pricing disclosures
• Add a minimum payment warning on credit card statements
• A ban on introductory and teaser rates
• Improved "Schumer's Box" disclosures
• A ban on mandatory arbitration agreements

Whew! That is a long list and full of some really good reformation ideas. In addition to these proposed changes, I'd also like to see these reforms:

• Limits or better disclosure of foreign currency conversion fees (often a whopping 3%).
• Clearer consumer rights and terms for credit card rewards and miles
• An end to the policy of mailing credit card customers "blank" checks unless specifically requested
• Mandatory accurate reporting of credit limits to the credit bureaus (Capital One, I'm looking at you)
• Clear disclosures about how payments are applied when you have a special promotional balances and a regular balance on your credit account
• Changes to credit scoring formulas to stop penalizing consumers when they canceling credit card accounts. This would lead to more consumer negotiation power [This one kinda intrigues me, though I'm a little fuzzy on the details as to what they'd like to see--Noah]

What other reforms would you like to see enacted? Share your ideas in the comments section below.

[Gigi77]

I work in federal political advocacy, and although I dont follow financial services issues, I am quite happy to see that Levin and his House counterpart Barney Frank are seriously preparing to go after some of the more onerous credit industry practices. I'll make sure to share any policy updates I get on the subject. I will say that the chances are slim to non that any of these reforms will make it through in this congress. The banking/financial services industry is an extremely powerful lobby. We may need to wait until 2009, but I'm pretty sure that many (not all) of these proposed reforms will see the light of day when the political climate is right

[Gigi77]

If you really want to show your support of this legislation- write your senators and ask them to co-sponsor it! Consumer Action has set up an advocacy alert (explaining the legislation to consumers) and grassroots letter (to senators) that you can send to via their online advocacy site. Just scroll down, edit the letter if you wish, or leave it as is,then enter your contact info (for the letter signature). Heres the link -

http://capwiz.com/consumeraction/issues/alert/?alertid=9783111

[Gigi77]

Also- heres a list of ALL of Consumer Actions Federal, State, and Agency Action Alerts as well as all pending legislation:

http://capwiz.com/consumeraction/issues/

There's lots of other good legislative proposals floating through Congress. If you click on a bill , you will find a link called "detailed" which shows the most recent legislative action. The Levin bill has seen no action since introduced in May... so a good grassroots letter writing (and even phone) effort is certainly in order.

[Gigi77]

More legislative developments:

House Passes Mortgage Tax Relief Bill

On October 4, the House passed legislation (H.R. 3648) that (if ratified)  would permanently exclude debt forgiven as a result of a mortgage foreclosure or renegotiation from income and provide a seven year extension of the existing deduction for private mortgage insurance.  It also would modifify the qualification tests for cooperative housing corporations. The Senate Finance committee is expected to consider the legislation soon.  Click here to see how your Representative voted: http://clerk.house.gov/evs/2007/roll948.xml. Also see: Ways and Means Committee Description of HR 3648

House Passes Bill Ending Private Debt Collection

The week of October 8th, the House passed H.R. 3056, the Tax Collection Responsibility Act of 2007.  The legislation would end the one year old effort to use private debt collectors to collect tax debts the IRS is not currently collecting.  That bill also contains a one year delay of a proposal enacted in 2006 that would impose a 3% withholding requirement on most state, local and federal government payments beginning in 2011.  The provisions were offset primarily by proposals targeting individuals who renounce their U.S. citizenship for tax purposes (termed ‘expatriation’).  Click here to see how your Representative voted: http://clerk.house.gov/evs/2007/roll960.xml

[Anonymous]

From reading that looks like F/R time all around.  Banks are now going to be required to verify whther or not you can afford a credit line?  Get ready to give everyone in the world access to your taxes.