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The past week has been highly important in the ongoing battle between consumers and merchants vs. the credit card industry. The focus has tightened on the duopoly of Visa and MasterCard in recent years, and after many hearings and much work, a solution might be on the horizon. However, the banks have considerable lobbying assets at their disposal, which means victory is not assured. I realize it's a bit of a long-shot, but I would love to see either Hillary Clinton or Barack Obama pick this up as an issue. If John Edwards was still in this race, I'm sure he would. This is another opportunity for them to appeal to his supporters.

Two bills have been introduced in the House that could make all the difference, both for everyday cardholders and for merchant account holders. Both are hit with ostentatious fees on a daily basis, and the former can incur harsh penalties without even knowing about it. The first is called the Credit Cardholders’ Bill of Rights (H.R. 5244), and the second is the Credit Card Fair Fee Act (H.R. 5546). The first is supported by Rep. Carolyn Maloney, the second by Rep. John Conyers.

Background info on each, below the jump.

First, there's a solid op-ed today in The Hill by Rep. Carolyn Maloney. She starts off by telling the story of a constituent whose rates were doubled even when she had paid her credit card fee in time, but had been late on a payment to someone else. Then she continues:

In recent years, the playing field between credit card companies and credit cardholders has become very one-sided. It is no surprise that it’s average American cardholders, and not the big credit card companies who are getting the short end of the stick.

A credit card agreement is supposed to be a contract, but what good is a contract when only one party has any power to make decisions? Cardholders deserve more bargaining power. Congress can and should help level the playing field for them.

I introduced the Credit Cardholders’ Bill of Rights (H.R. 5244) to give American credit card holders a fair deal. My comprehensive credit card reform bill takes a balanced approach to reforming major industry abuses and improving consumer protections for cardholders. It would put an end to many of the tricks and traps that make cardholders incur interest rate hikes and pricey fees. It would also protect cardholders from arbitrary interest rate hikes, hidden fees, due date gimmicks, and misleading account terms.

Maloney's bill focuses on consumers, and my guess is it needs no explanation. Conyers' bill is just as important, and because merchants pass along fees in higher prices, it matters to consumers, too. Consumer Affairs has the best article on this, here:

For years, retailers and merchants have been waging a quiet war with the financial industry over "interchange fees" -- the hidden costs of processing credit and debit card transactions that can wipe out a store's profits while earning banks a pretty penny.

Now Congress has stepped into the fracas with new legislation that would enable merchants to negotiate the fees they pay for taking plastic.

The "Credit Card Fair Fee Act of 2008," introduced by House Judiciary Committee chairman John Conyers (D-MI), would require lenders possessing "substantial market power" to negotiate with merchants and retailers on terms for fees paid when processing card transactions.

If a voluntary agreement cannot be reached, both sides would have to submit to binding arbitration overseen by the Justice Department and the Federal Trade Commission (FTC).

"This legislation is intended to give merchants a seat at the table in the determination of these fees," Conyers said. "It is not an attempt at regulating the industry and does not mandate any particular outcome. This legislation simply enhances competition by allowing merchants to negotiate with the dominant banks for the terms and rates of the fees."

Taken together, if these bills become law, it would be the biggest victory for consumers over the credit card industry in years. Maloney has more info on the Credit Cardholders' Bill of Rights on her website, and Conyers' co-sponsor Chris Cannon has more info on the Credit Card Fair Fee Act on his House page.

This is just background now, and it's a big step just to get these bills introduced. But the real fight lies ahead.

Originally posted to Interrobanger on Thu Mar 13, 2008 at 08:19 AM PDT.

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Comment Preferences

    •  Everybody loses in the current game (1+ / 0-)
      Recommended by:

      except for those at the top, who have stacked the deck.
      And everybody else does all the work for them.

      Need a cup of coffee? Here, use your card. Need some gas? Use your card. Have a good or service to provide a paying customer? Yes, we'll take a chunk of that payment for letting you run their card at your establishment.

      I really wish it were possible to simply not use cards at all-- maybe then these companies would listen to reason.

      As it stands, our best bet is to support legislators who go to bat on all our behalf against this behomoth.

  •  Barack introduced a credit card bill with (6+ / 0-)

    Russ Feingold. On the way out the door so I can't look up the details, but I wish he'd talk about it more.

  •  Maloney's bill needs to address usury. (5+ / 0-)
    Recommended by:
    lcrp, whitewidow, Acadian, carver, satyr9us

    I haven't read the bill--but I remember the days when usury was a crime, instead of standard business practice.


    American Heritage Dictionary u·su·ry       (yōō'zhə-rē)    

    (1) The practice of lending money and charging the borrower interest, especially at an exorbitant or illegally high rate.
    (2)  An excessive or illegally high rate of interest charged on borrowed money.
    (3) Archaic Interest charged or paid on a loan.  

    I recently received notice that one of my credit cards, if I did not opt out, would start charging an interest rate of prime plus 24%!

    It used to be that a 25% rate of interest was what loan sharks would charge.  Hell, the "five for six" guy, who would loan you $5 now, pay him back $6 on payday, was only charging 20% interest--and THAT was illegal.

    Here's something that would help everyone who has a credit card--bring back usury laws on a national basis, so that no one is ever charged more than a reasonable rate of interest, say 20%.

    To say my fate is not tied to your fate is like saying, "Your end of the boat is sinking."--Hugh Downs

    by Dar Nirron on Thu Mar 13, 2008 at 08:29:30 AM PDT

  •  Separate issue: "universal default." (5+ / 0-)

    It used to be that if you kept your payments up at a particular creditor's office, that this creditor would keep you on as a customer, with no more hassle.  I remember my parents keeping up payments for one lender religiously, even though they were behind elsewhere.

    In these days of "credit reporting" and "universal default," if you are late on ANY loan ANYWHERE, ALL of your interest rates are likely to go up.

    This is an injustice, and what seems to be behind Maloney's bill (which I have not yet read--I'm at work and taking a blogging break).  Universal default is a way to up a lender's profits with virtually no effort on their part.  It is wrong!

    To say my fate is not tied to your fate is like saying, "Your end of the boat is sinking."--Hugh Downs

    by Dar Nirron on Thu Mar 13, 2008 at 08:33:19 AM PDT

  •  much needed reforms (3+ / 0-)
    Recommended by:
    lcrp, Acadian, satyr9us

    thanks for the diary

    You can't wear a flag pin in jail.

    by whitewidow on Thu Mar 13, 2008 at 08:46:28 AM PDT

  •  I'm calling my Congressional Representative today (1+ / 0-)
    Recommended by:

    to find out whether he's supporting these bills. He better be.

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