Levin Cosponsors Comprehensive Credit Card Legislation

WASHINGTON – Sen. Carl Levin, D-Mich., today joined Sen. Chris Dodd, D-Conn., in introducing comprehensive legislation to improve credit card billing, marketing, and disclosure practices. The Credit Card Accountability, Responsibility and Disclosure Act (the C.A.R.D. Act) is aimed at stopping abusive credit card practices that deepen or prolong credit card debt held by consumers.

“With all the economic hardship facing folks today, from falling home prices to rising gasoline and food costs, it is more important than ever for Congress to act now to stop credit card abuses and protect American families from unfair credit card practices,” Senator Levin said. “The Dodd bill is the strongest credit card bill yet in this Congress, and I am very proud to be a cosponsor. It adds important protections to the Levin-McCaskill bill, which was based on investigative hearings into unfair credit card practices conducted by the Permanent Subcommittee on Investigations.”

Dodd is chairman of the Senate Committee on Banking, Housing, and Urban Affairs which has jurisdiction over credit card legislation. Levin is chairman of the Permanent Subcommittee on Investigations and is leading an ongoing Subcommittee investigation into unfair practices in the credit card industry. Levin held two Subcommittee hearings in 2007, and introduced legislation – the Stop Unfair Practices in Credit Cards Act, S. 1395 – to ban the worst of the credit card abuses documented in the hearings. The bill introduced today incorporates most of the provisions of S. 1395.

Some of the key provisions of the Dodd-Levin bill would:

• No Interest on Debt Paid on Time. Prohibit interest charges on any portion of a credit card debt which the card holder paid on time during a grace period.

• Prohibition on Universal Default. Prohibit credit card issuers from increasing interest rates on cardholders in good standing for reasons unrelated to the cardholder’s behavior with respect to that card.

• Apply Interest Rate Increases Only to Future Debt. Require increased interest rates to apply only to future credit card debt, and not to debt incurred prior to the increase.

• No Interest on Fees. Prohibit the charging of interest on credit card transaction fees, such as late fees and over-the-limit fees.

• Restrictions on Over-Limit Fees. Prohibit the charging of repeated over-limit fees for a single instance of exceeding a credit card limit.

• Prompt and Fair Crediting of Card Holder Payments. Require payments to be applied first to the credit card balance with the highest rate of interest, and to minimize finance charges.

• Fixed Credit Limits. Require that card issuers offer consumers the option of operating under a fixed credit limit that cannot be exceeded.

• No Pay-to-Pay Fees. Prohibit charging a fee to allow a credit card holder to make a payment on a credit card debt, whether payment is by mail, telephone, electronic transfer, or otherwise.

• Penalty Rate Repeal if Cardholder is Violation-Free. Require issuers to remove penalty interest rates imposed on a cardholder after 6 months if the cardholder commits no further violations.

• Stop to Billing Games. For example, require billing statements to be sent out 21 days before the due date (instead of 14 days under current law), require acceptance of payments until 5 p.m. of the due date, require bank branches that accept payments to credit them on the same day they are received, and create a presumption that payments mailed 7 days before the due date are on time.

• Enhanced Protection against Unfair and Deceptive Practices. Authorize each federal banking agency to issue regulations barring unfair or deceptive practices by the financial institutions they oversee. Establish standard definitions for prime rate and fixed rate cards.

• Strengthened Oversight. Require annual audits of credit card issuers by oversight agencies to check compliance with consumer protections, and require additional industry data on the imposition of interest rates and fees.

• Expanded Disclosure. For example, require issuers to provide individual consumer account information and to disclose the time period and total interest needed to pay off the debt if only minimum monthly payments are made.
• Protections for Young Consumers.
  1. Require card issuers soliciting persons under the age of 21 to obtain the signature of a parent, guardian, or other individual who will co-sign for the debt; proof the applicant can independently repay the debt; or proof the applicant has completed a certified financial literacy course.

  2. Prohibit credit bureaus from furnishing credit reports for consumers under age 21, unless the consumer initiates the request. Allow consumers at least 18, but not yet 21, to choose to receive card solicitations.