Credit Card Reform: Coming to a Wallet near You

Two weeks ago President Obama called all the big Credit Card CEOs to the woodshed (I mean, White House) for a talking to. The subject was their current practices that hike interest rates retroactively, assess hidden fees, require paying off balances with lower interest rates before higher ones, and charge excessive late fees. It almost feels like they want to catch their customers in a debt trap.

Last week, the House of Representatives passed their version of the bill, sponsored by Representative Carolyn Maloney (D-NY). Next up is the Senate where Chris Dodd (D-CT) is leading the way. The Senate bill is even more robust and hopefully its provisions will carry the day when negotiations begin in conference. Here a link to piece by Dodd on what he wants to see included in the final bill, which inlcudes prohibiting companies from charging more than one over-limit fee per billing period and limiting aggressive marketing to young borrowers.

According to the Consumer Federation of America, Americans now carry about $850 billion in credit card debt, which represents an average debt of over $17,000 for the approximately 50 million households that do not pay their credit card balances in full every month. The number of families that are behind in paying their credit card bills – a sign of serious financial problems to come – is now approaching the highest level on record.

One of the first steps to helping families build assets is outlawing business practices that succeed only when consumers are unwittingly stripped of their assets.