Consumers Silenced in Testimony on Unfair Credit Card Practices

On March 13, registered Republican Steven Autry had planned to share his experience with Capital One before the House Financial Services Committee's hearings on H.R. 5244, a proposal to ban unfair and deceptive credit card practices:

"My relationship with Capital One goes back to 1999, when I was solicited with an offer for a Visa card with a "fixed" 9.9% rate card. I applied over the phone, and was approved. The card was used for both purchases and balance transfers in a positive relationship with Capital One for eight years until July, 2007. That's when Capital One advised me in a billing insert that my "fixed" rate of 9.9% was being raised to 16.9%. No reason or explanation was given – I was not late on payment, and had not utilized the entire credit limit. This was a unilateral change to the terms of our agreement.

"In August, of 2007, I wrote a letter to Mr. Richard D. Fairbank, Chairman, President, and CEO of Capital One, at the McLean, Virginia home office. My written statement will contain a copy of Capital One's response which includes the line, 'Unfortunately, changes in the interest-rate environment or other business circumstances may require us to increase rates, even for fixed-rate accounts in good standing.'"

Neither Steven nor the other three credit card victims who were invited to testify actually did. Congressman Spencer Bauchus (R-AL) and the credit card companies led the rally to muzzle the consumers by demanding they agree to publicly release all of their private financial records – or not be able to testify. (Bauchus, not surprisingly, has been generously funded by the financial services industry.)

The bully tactic worked. Representatives from Capital One, Chase and Bank of America spoke for hours about how fair and consumer-friendly their practices were, citing "facts" without any supporting data. Yet the consumers who flew in to testify were silenced by the threat of the financial institutions being able to expose anything they wanted about the consumers or smear them after the hearings were over.

Rep. Mark Udall (D-CO) railed on behalf of his constituent Susan Wones, who traveled to D.C. to tell lawmakers about how her credit card company doubled her interest rate to 25 percent without notice and despite her record of paying her bills on time. Susan holds a high credit score rating, pays her bills on time and doesn't exceed her credit card limit.

"None of the consumer witnesses objected to signing releases that would allow the committee to verify the facts concerning their individual stories, and I must say that I found the Financial Services Committee’s insistence on a broad waiver of privacy rights to be both unnecessary and counter-productive," Udall said in a release. "Narrowly drawn waivers could have been drafted by Committee staff weeks ago, instead of waiting until the eleventh hour to prevent consumer testimony. What happened today is emblematic of why so many Americans are fed up with Washington."

Rep. Maloney has promised to hear the voices of these consumers. Time will tell if that does indeed happen.

For now, we have Steven's written testimony, which holds this analogy:

"The NFL does not allow one team, in the midst of the fourth quarter, to unilaterally move their end zone 20 yards in their favor just because they don't like the point spread. The rules are laid out before the kickoff, and the umpires enforce the same rules for both home and visiting teams for the whole contest. It's time for legislation at the federal level that tells the credit card industry, 'Game Over' to unilateral, one-sided, rule changes."

View the archived webcast and read the prepared testimony of the witnesses who appeared before the Subcommittee on Financial Institutions and Consumer Credit.

Rep. Maloney Introduces Credit Cardholders' Bill of Rights

The wave of legislation designed to protect consumers from unfair credit practices continues in the House of Representatives. Yesterday, Rep. Carolyn Maloney (D-NY) introduced the "Credit Cardholders' Bill of Rights Act of 2008" (H.R. 5244), which aims to amend the Truth in Lending Act and abolish predatory lending practices and abuses.

The Bill of Rights includes provisions that:

• protect cardholders against arbitrary interest rate increases (such as universal default and "any time any reason" price hikes) and require a 45-day notice of any interest rate increases
• prevent cardholders who pay on time from being unfairly penalized (eliminating double-cycle billing and fees on interest-only balances)
• protect cardholders from due date gimmicks (requiring card companies to mail statements 25 days before the due date - 14 days is the current minimum - and prohibits charging late fees if provided with proof of mailing the bill within 7 days of the due date)
• shield cardholders from misleading terms (such as "fixed rate" vs. "prime rate")
• empower cardholders to set limits on their credit (creating a self-selected credit limit that cannot be exceeded, thereby eliminating over-the-limit fees)
• require card companies to fairly credit and allocate payments (many card companies require that payments be allocated to lower interest rate balances first)
• prohibit card companies from imposing excessive fees on cardholders (limits the number of over-the-limit fees to 3)
• prevent card companies from giving subprime credit cards to people who can't afford them (requiring that fees for subprime cards whose total fixed fees over a year exceed 25% of the credit limit be paid upfront before the card is issued)
• require Congress to provide better oversight of the credit card industry (improves data collection on industry profits and fees, and provide an annual accounting to Congress)
• contain NO rate caps, fee setting or price controls (a concession to the card companies)

Maloney, who chairs the House Financial Institutions and Consumer Credit Subcommittee, said, "A credit card agreement is supposed to be a contract, but in recent years cardholders have lost the ability to say no to unfair interest rates hikes and fees." The bill "levels the playing field between card companies and cardholders while fostering fair competition and free market values. It sets no rate caps, fees or price controls, nor does it dictate any business models to card companies."