Senators introduce bill to fight abusive credit-card practices

The Stop Unfair Practices in Credit Cards Act follows an investigation and a hearing by the Permanent Subcommittee on Investigation, of which Levin is chairman and on which McCaskill serves.

In October, Levin released a Government Accountability Office report analyzing credit card fees, interest rates and disclosure practices of issuers of major credit cards.

Following that report, Levin directed the subcommittee to investigate unfair credit card practices that worsen Americans’ debt.

In March, he was chairman of a subcommittee hearing, during which the CEOs of the three largest credit card issuers in the country – Bank of America, JP Morgan Chase Bank and Citigroup – were called as witnesses.

“Credit card issuers too often sock consumers with sky-high interest rates and excessive fees, making it harder and harder for families to climb out of debt,” Levin said in a news release.

The bill

Provisions in the Stop Unfair Practices in Credit Cards Act include:

• Limits on penalty interest. Interest-rate hikes on credit-card accounts would be prohibited unless the borrower agrees to them at the time, and in any event, penalty interest rate hikes would be limited to no more than 7 percent.

• Interest-rate increases applied only to future debt. Under the legislation, increased rates would only apply to future debt, not to debt that was incurred prior to the rate increase.

• No interest on fees. The charging of interest on credit card transaction fees such as late fees and over-the-limit fees would not be allowed.

• Restrictions on over-limit fees. The act would prohibit credit card companies from charging repeated over-limit fees for a single instance of exceeding the credit limit, and allow such fees to be charged only when a cardholder’s action, rather than a penalty, causes the limit to be exceeded.

• No pay-to-pay fees. The act would prohibit charging a fee to allow the cardholder to make a payment on credit card debt, whether payment is by mail, telephone, electronic transfer or otherwise.

• Fixed credit limits. The bill would require that card issuers offer consumers the option of having a fixed credit limit that cannot be exceeded.

The Stop Unfair Practices in Credit Cards Act also calls for currency exchange fees to reasonably reflect the card issuers’ actual costs and would require consumer payments to be applied first to the credit card balance with the highest interest rates and prohibit late fees if the card issuer’s actions caused a delay in crediting a payment.

“Credit card companies must be stopped from preying on the most vulnerable Americans with unfair and confusing practices,” McCaskill said in a news release.

“We have to fight … to make sure that American consumers are not getting ripped off and are fully informed of how these companies are manipulating their financial security,” she added.

The act has been endorsed by Consumer Action, Consumer Federation of America, Consumers Union, National Consumer Law Center, U.S. Public Interest Research Groups and the Center for Responsible Lending. [[In-content Ad]]