I can't find a link to the story anywhere online, so I'll post this story from the American Bankruptcy Institute Update newsletter:
GROUP CALLS ON NEW CONGRESS TO ENACT CREDIT CARD ABUSE LEGISLATION
The Center for American Progress, a liberal think tank closely allied with the new Democrat majority in Congress, challenged the 110th Congress to enact legislation that protects consumers from “abusive credit card lending practices” in a press release today outlining the Center’s legislative priorities for the new Congress. Citing that Americans pay about $90 billion annually in interest and penalty payments on credit cards, the group called on Congress to: (1) enact legislation to ban retroactive application of interest rate increases so credit card companies can no longer raise a customers’ interest rate and then apply that higher rate to earlier purchases; (2) ban the practice of universal default to prevent credit card companies from changing the terms of a card based on a customer’s experiences with another issuer; (3) ban what it deems to be abusive and excessive fees (such as unilateral over-the-limit fees when the issuer approved the over-the-limit transaction, and processing fees when consumers pay their bill by phone or online); (4) improve disclosure by fully adopting the recommendations made in the GAO’s Sept. 12 report entitled “Credit Cards: Increased Complexity in Rates and Fees Heightens Need for More Effective Disclosures to Consumers;” and (5) crack down on predatory debt-collection companies by updating and strengthening the Fair Debt Collection Practices Act (FDCPA).
I don't often agree with the Center for American Progress--their motto is "progressive ideas for a strong, just, and free America," which sounds okay, except they have very screwy definitions for the words "just" and "free."
I certainly don't want any of my readers to donate any money to these people, but I do have to say that I agree with the basic gist of this initiative. Post-BAPCPA, the creditors have no right to protest this kind of legislation, and as much as I'd prefer Congress do nothing for the next 40 or 50 years, they would be doing their jobs if they protected us from creditor abuses. At the very least, the should force creditors to abide by written contracts; that is, they should make it unlawful for creditors to re-write the terms of a loan agreement without the written consent of the consumer.
Let's look at each plank:
1. Ban retroactive rate increases. This is a no-brainer. If creditors put fine print in their contracts that allow them to raise rates on prior purchases, then the contract is meaningless. Congress should do this.
2. Ban universal default. This will happen; it's already happening in a lot of states, and the lenders with some integrity aren't doing it anyway. A credit card agreement is between two individual parties, the lender and the borrower. The borrower's relationship with some other lender should have no bearing.
3. Ban abusive and excessive fees. Again, I support this idea. It's an act of fraud for a creditor to approve a purchase and then charge the consumer a fee for going over the limit. I'm a little less sure about processing fees. If it's a lot cheaper for the creditor to process payments by mail, I don't see why they shouldn't charge a fee for payments by phone. That is, if the consumer is talking to a live operator.
4. Improve disclosures. I haven't read the relevant GAO report, but I'm generally always in favor of more disclosures. That's because consumers should bear resonposibility for their borrowing behavior, but they can't be expected to do that if they have incomplete information. (Or if the creditor keeps arbitrarily changing the terms of the credit card agreement.)
5. Strengthen the FDCPA. The FDCPA is pretty onerous as it is, but I'm generally unsympathetic to collectors. I hear frequent complaints of FDCPA violations to this day, so I know there are a lot of collectors ignoring the law. I'd also like to see more FDCPA provisions apply to the original creditor and not just third-party collectors.
We'll see if the Democratic congerss will do the bidding of the CAP and get this all done. My hunch/fear is that it will be attached to some sort of amendment/repeal of BAPCPA, in which case I won't support it. Bankruptcy is a separate issue, it's been addressed, and now they should address creditor behavior with completely new legislation.