February 12, 2009


Washington, DC – Senator Chris Dodd (D-CT), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, today re-introduced The Credit Card Accountability, Responsibility and Disclosure Act (“the Credit CARD Act”), legislation to better protect consumers from confusing, misleading and predatory practices by credit card companies.  Tomorrow, the Banking Committee will hold a hearing entitled “Modernizing Consumer Protection in the Financial Regulatory System: Strengthening Credit Card Protections.”
“Families in Connecticut and across the country are struggling to make ends meet as layoffs continue, home values plunge, and lines of credit are cut or canceled,” said Dodd.  “Far too many families are forced to rely on short-term, high-interest credit card debt to finance their most basic necessities.  The last thing they need is further financial hardship brought on by abusive credit card practices – these practices are wrong, they’re unfair, and they must end.  The Credit CARD Act will protect American consumers by bringing an end to these practices and strengthening consumers’ financial security and stability.”
The Credit CARD Act will help protect American consumers by bringing an end to wrongful credit card practices.  Among other provisions, the legislation will:
  • Protect consumers from “any time, any reason” interest rate increases and account changes;
  • Prohibit unfair application of card payments;
  • Protect cardholders who pay on time;
  • Limit fees and penalties;
  • Ensure that cardholders are informed of the terms of their account; and
  • Protect young consumers from credit card solicitations.
A more detailed summary of the legislation is attached. The bill is cosponsored by Senators Carl Levin (D-MI), Robert Menendez (D-NJ), Jack Reed (D-RI), Daniel Akaka (D-HI), Charles Schumer (D-NY), Jon Tester (D-MT), Sherrod Brown (D-OH), Jeff Merkley (D-OR), John Kerry (D-MA), Patrick Leahy (D-VT), Richard Durbin (D-IL), Tom Harkin (D-IA), Claire McCaskill (D-MO), Sheldon Whitehouse (D-RI), and Robert Casey (D-PA). 
Senator Dodd has been fighting for consumers against wrongful practices within the credit card industry for over twenty years.  Within days of becoming Chairman, Dodd launched an examination of the credit card industry.  At a January 2007 hearing, Dodd put the industry “on notice,” cautioning card issuers to avoid practices that are deceptive, misleading and predatory. While some companies heeded Dodd’s call, too few changed their policies and behaviors. The Credit CARD Act will strengthen the credit card industry’s regulation and oversight, and prohibit unfair and deceptive practices such as universal default and double-cycle billing.
Today, Senator Dodd submitted the following statement for the Congressional record:
Mr. President, I am pleased today to be reintroducing comprehensive credit card legislation that would reform credit card practices and prohibit card issuers from continuing policies that are threatening the financial security of American consumers and their families.  The “Credit Card Accountability, Responsibility and Disclosure Act” (“Credit CARD Act”) will help to end the practices that cost American families billions of dollars each year.
This is a time of serious hardship for American families.  As losses mount as a result of the economic crisis, lenders are squeezing consumers, often unfairly and without adequate notice, by raising credit card rates and tightening repayment terms.  Credit card delinquency rates are inching higher, and repayment rates are dipping.  At a time when Americans are becoming increasingly reliant on credit cards, credit card companies are being more aggressive about finding ways to charge their customers.  Over $17 billion in credit card penalty fees were charged to Americans in 2006 – a ten-fold increase from what was charged just ten years ago.  These penalties are contributing to the avalanche of credit card debt under which many American consumers increasingly find themselves buried. 
In my travels around Connecticut, I hear frequently about the burden of these credit card practices from constituents.  Connecticut has the third-highest median amount of credit card debt in the country -- $2,094 per person.  Non-business bankruptcy filings in the state are increasing, and in the second quarter of last year, credit card delinquencies increased in seven of eight counties in the state.
In December, the Federal Reserve, Office of Thrift Supervision, and National Credit Union Administration finalized unfair and deceptive acts and practices rules aimed at curbing some of these practices.  For example, for customers in good standing the new rules will prevent issuers from applying interest rate increases retroactively to credit card debt incurred prior to the interest rate increase.  They will also help ensure that issuers apply payments fairly, and extend the time that consumers have to make their credit card payments.  The rules are a good first step in providing needed consumer protections in some areas.  They fall short in other important areas, however, failing to address issues including universal default, “any time any reason” repricing, multiple overlimit fees, and youth marketing, which I’ll explain in a moment. 
In anticipation of rules going into effect in July of 2010, issuers are raising their interest rates and cutting lines of credit even on consumers with a long and unblemished history of good payment, thereby underscoring the need for this legislation.
That is why I am reintroducing the Credit CARD Act.  This bill will help to reform credit card practices that drag so many American families further and further into debt, and prevent banks from taking advantage of consumers through confusing, misleading, and unfair terms and procedures.  It strengthens regulation and oversight of the credit card industry and prohibits the unfair and deceptive practices that in far too many instances keep consumers mired in debt.  
Among its other provisions, the CARD Act will eliminate:
  • Imposition of excessive fees and penalties;
  • Universal default provisions that permit credit card issuers to increase interest rates on cardholders in good standing for reasons unrelated to the cardholder=s behavior with respect to that card;
  • “Any time any reason” changes to credit card agreements – the bill prevents issuers from unilaterally changing the terms of a credit card contract for the length of the card agreement; and
  • Retroactive interest rate increases, unfair payment allocation practices, and double-cycle billing. 
The Credit Card Act also contains additional critical consumer protections.  Among other things, the bill would:
  • Allow customers who close their accounts to pay under the terms existing at the time the account is closed;
  • Ensure that cardholders receive sufficient information about the terms of their account;
  • Require issuers to lower penalty rates that have been imposed on a cardholder after 6 months if the cardholder meets the obligations of the credit card terms; and
  • Enhance regulators’ ability to protect consumers against unfair credit card practices by giving each federal banking agency the authority to prescribe regulations governing unfair or deceptive practices by the institutions they regulate.
The bill also reins in irresponsible lending through a number of provisions aimed at protecting young consumers who lack the ability to repay substantial credit card debt.
This legislation incorporates several key concepts included in the legislative proposals put forth by some of my colleagues, notably Senators Levin, Menendez, Akaka, and Tester.  Each is a cosponsor of this legislation, as are Senators Reed, Schumer, Brown, Merkley, Kerry, Leahy, Durbin, Harkin, McCaskill, Whitehouse, and Casey. 
This bill has the support of a wide array of consumer advocates and labor organizations, including the Center for Responsible Lending, Connecticut Public Interest Research Group, the Connecticut Association for Human Services, Consumer Action, Consumer Federation of America, Consumers Union, Demos, the Leadership Conference on Civil Rights, the NAACP, the National Association of Consumer Advocates, the National Consumer Law Center, the National Council of LaRaza, the Service Employees International Union, and the U.S. Public Interest Research Group.  The bill also has the support of the National Small Business Association.
As the U.S. economy tightens, financially vulnerable families need the protections of the Credit CARD Act more than ever.  That is what the American people and the people of Connecticut are demanding.  For this reason, I urge my colleagues to join me in cosponsoring, and eventually in enacting the Credit CARD Act.