U.S. Rep. Nita Lowey, D-Westchester/Rockland, called for passage of federal legislation that would end egregious billing practices of credit card companies, like “universal default” and “double cycle billing,” which make it difficult for individuals and families to escape a cycle of debt.
As prices for consumer goods rise, more Americans ”“ particularly college students ”“ are forced into credit card debt to make ends meet. The average outstanding balance on undergraduate students”™ credit cards is $2,169, and the average interest rate for standard bank credit cards topped 19 percent last year.
Mounting debt is compounded by practices like “universal default,” or interest rate increases based on a cardholder”™s other accounts, and “double-cycle billing,” or assessing interest on all charges made in a month when the entire balance is not paid in full. Companies also may offer introductory interest rates that rise dramatically without the cardholder”™s knowledge.
Lowey called for enactment of the Credit Cardholders”™ Bill of Rights Act in Congress. This legislation would prohibit universal default and double-cycle billing. It would also prevent credit card companies from unfairly targeting minors, require 45-day notice of interest rate increases, and require payments to apply to the lower interest rate if there are two separate rates applied to bills. The legislation would also allow cardholders to set a ceiling on their credit limit, preventing students from getting in over their heads.
“These practices are deceptive, unfair, and unfortunately totally legal,” Lowey said. “Consumers need to know that credit card companies are using these egregious practices, and Congress needs to put an end to it.”
The Credit Cardholders”™ Bill of Rights Act (H.R. 5244) has been approved by the House Financial Services Committee and may be considered by the House of Representatives within the next two weeks.
