April 30, 2009

Today, U.S. Rep Ed Perlmutter (CO-07), a member of the House Financial Services Committee and Rules Committee, lead debate about the bill to end credit card gimmicks on the floor of the House this morning. Below are Perlmutter’s remarks from the floor concerning the Credit Card Holders Bill of Rights, HR 627. Click here to view video of the floor speech:

“Madam Speaker, on a regular basis, constituents of mine from Colorado contact me in disappointment with stories about actions taken by their credit card company which threatens their quality of life.

Hard working Americans who make payments on time, have good credit, and live within their means see their rates increase without notice and without cause.

In a time when many Americans are struggling to pay their mortgage, when healthcare costs are skyrocketing, and many are out of work, unfair credit card practices threaten many families. Americans deserve a fair shake!

They deserve transparency, not smoke and mirrors. They deserve reliability, not chaos in their statements.

The bill brought to us today, the Credit Cardholders’ Bill of Rights Act, gives consumers a fair deal.

Prior to 1990, credit cards had more or less standardized rates of around 20 percent, few fees, and they were generally offered to persons with high credit standing. However, since 1990, card issuers have adopted risk-based pricing and as a result of this a new pricing structure was created.

Today’s credit cards feature a wide variety of interest rates that reflect a complex list of factors. The terms of most agreements have become so complicated consumers don’t know what they are getting into.

Most, if not all, agreements allow the issuer to change the interest rate or other terms of the agreement at any time for any reason.

For example, Double Cycle Billing – which is where the issuer applies amounts above the minimum payment to the lowest of the interest rates.

HR 627, bans this practice and requires the issuer to apply payments over the minimum payment to the balances of the highest interest rate.

Another practice I find egregious is Universal Default. Universal Default is when the issuer raises the interest on a consumer’s credit card because of activity happening on another unrelated account. HR 627, states issuers can only raise interest rates the reasons provided for in the statute.

Madam Speaker, the American people have spoken. I have many stories from my own family in regards to unfair credit card fees and rate hikes. Americans are tired of opening their monthly credit card bill and noticing their interest rate jumped from 8% to 15 % for no reason.

HR 627, establishes responsible regulation within an industry which has taken advantage of many vulnerable Americans.

Finally, I want to note the careful balance this bill takes. This bill is the product of years of hearings, including input from many stakeholders in consumer protection, the credit card industry, and roughly 60,000 public comments. This bill provides the fairness Americans have asked for from their credit card companies.”