Consumer Credit Card Protection Act of 2005 Seeks to Eliminate Anti-Consumer Practices

By Rebecca Lindsey, CardRatings.com Senior Staff Writer



Critics of credit card issuers have long complained about ambiguous practices that result in interest rate hikes and increased fees for cardholders.

In late July 2005, legislation was introduced that would help limit some of the common practices used by credit card issuers to raise cardholder fees.   The proposed legislation, sponsored by Bernard Sanders (I–VT) and Barney Frank (D-Mass), would end what Sanders referred to as “some of the most egregious anti-consumer practices of the nation’s credit card companies.

H.R. 3492, or the Consumer Credit Card Protection Act of 2005, proposes additions/amendments to the Truth in Lending Act, including:

• Prohibiting universal defaults on credit card accounts.   Universal default clauses allow interest rates increases for events wholly unrelated to the consumer’s credit card account.
• Requiring credit card companies to provide advance notice of increase in any interest rate and/or imposition of any fee.
• Prohibiting credit card issuers from raising interest rates on pre-existing balances on ‘fixed rate’ cards.   Any change in terms should apply only to new purchases (pre-existing balances should not be affected).

Sanders noted in a press conference held Tuesday, September 6th:

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“Countless consumers have made the mistake of responding to ‘pre-approvals’ offering low ‘fixed rates’ only to find out later — often after using the card or transferring a balance onto it — that the interest rates can not only rise, but the new higher rates will apply retroactively to the purchases and transfers made under the old terms.”

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The Truth in Lending Act was originally enacted by Congress in 1968 as part of the Consumer Protection Act.   The law is designed to protect consumers in credit card transactions by requiring clear disclosure of key terms of the lending agreement and all associated costs.   Several major amendments have been made to the law in a continued effort to protect consumers.   The current legislation under consideration would further these efforts, compelling the credit card industry to be more upfront with consumers in their practices.

Sanders added,

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“Congress has a responsibility to stop credit card companies from ripping off the middle class by using bait-and-switch tactics.  Charging economically vulnerable Americans outrageous interest rates and fees is simply not acceptable."

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To view the Consumer Credit Card Protection Act of 2005 (H.R. 3492) online it its entirety, please visit the Library of Congress's website.

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