WASHINGTON (2/6/08)—Rep. Barney Frank (D-Mass.), who chairs the House Financial Services Committee, and Rep. Carolyn Maloney (D-N.Y.), who heads that panel’s financial institutions subcommittee, have asked fellow House members for support for credit card reforms. In what is known as a “Dear Colleague” letter, Frank and Maloney noted that they are introducing comprehensive credit card legislation they say addresses major abuses, while fostering fair competition and “the values of the free market.” According to the bill’s designers, it would:
* Offer cardholders the right to cancel their card when faced with a rate increase while paying off their existing balance at the rate they agreed to when they borrowed it; * Bar issuers from applying rate increases retroactively, to existing balances, for reasons unrelated to whether cardholders have paid their bills on time: * Ban collection of interest on amounts already paid; * Require issuers to allocate a cardholder's payment between their balances, where cardholders have balances at different rates; * Stop issuers from using "prime rate", "fixed rate" and similar terms in a deceptive way by setting a single definition of such terms; * Require that payments made before 5pm EST on the due date be considered on time and be credited that day; * Require that for cards whose total fixed fees over a year exceed 25% of the credit limit, all fees for the year be paid up front, before the card is issued.
The letter said that Frank and Maloney plan to move forward promptly with legislative hearings and markups this spring. Last year, Frank put card reform on his committee’s legislative priorities agenda and charged Maloney with the task. The New York congresswoman in August, after convening a roundtable discussion with credit card issuers and consumer groups, identified four principles she said would guide her credit card reform legislation. The first “pillar” is to ensure consumers are able to repay their debt before a credit card is issued. The second pillar is simpler consumer disclosures. The third is to better inform cardholders throughout the time they hold a card. The final is to promote consumer education by issuers that would encourage "responsible, successful credit use, especially among new credit entrants and customers with special needs."