Credit Cardholders' Bill of Rights

Most economists like free markets, but free markets without sensible rules have caused us a lot of problems lately.  When it comes to credit cards, the rules got written in such fine print that a consumer backlash is pushing Congress to pass Rep. Carolyn Maloney's (D-NY) Credit Cardholders' Bill of Rights, H.R.627.  The Senate will take up its version this week.  President Obama devoted this Saturday radio address to supporting the bill, and he'll urge passage again at a town hall meeting Thursday in Albuquerque, NM.  Enactment by Memorial Day seems likely.

What's the problem?:

• retroactive interest rate hikes on existing balances
• hidden fees and repeated "over the limit" fees
• "double cycle billing" interest charges despite on-time bill payment
• crediting bill payments to the lowest interest rate balances
• damaged credit ratings from pre-approved cards that weren't requested
• showering credit cards on those under age 21
• "universal default" raising charges for unrelated credit impairments
• Not allowing consumers to set limits in advance on their charges

Credit constrained consumers, those under 21, and those too busy to read the fine print have felt the sting of high credit card charges, which they consider unfair.  Then they found out they couldn't win arbitration proceedings they didn't know they'd signed up for.  Now they're demanding action by Congress.

The House Financial Services hearing on March 19, 2009 provided lots more detail.

The American Bankers Association responds that it is already working to implement many of the Bill of Rights changes under Federal Reserve regulation to take effect July 1, 2010 and that these changes will ultimately restrict consumer credit and raise costs to consumers.

One thing about the profit motive and management bonuses that depend upon rising stock prices, it can push the market to venture beyond what most Americans would consider acceptable practices.  The system corrects itself with consumer backlash and government action.