Don't Just Charge It

Middle-class Americans all across the country are being exploited by credit card companies "What has happened over the years is that we have deregulated the banking industry, so now you can have bankers and lenders ripping people off," Senator Bernie Sanders said last Friday on the Air America Radio program Brunch with Bernie. "In terms of deregulation, credit card companies are now charging people an interest rate of over 30 percent even when they always pay their bills on time."

Middle-class Americans all across the country are being exploited by credit card companies. "What has happened over the years is that we have deregulated the banking industry, so now you can have bankers and lenders ripping people off," Senator Bernie Sanders said last Friday on the Air America Radio program Brunch with Bernie. "In terms of deregulation, credit card companies are now charging people an interest rate of over 30 percent even when they always pay their bills on time."

Banks are required to disclose the terms associated with signing up for a credit card, but the Government Accountability Office found consumers "often had difficulty using the disclosures to find and understand key rates or terms applicable to the cards." Credit card companies are charging sky-high interest rates and outrageous fees while leaving consumers mostly in the dark.

Making matters worse, the fine print of most credit card applications contains the following disclaimer, "We reserve the right to change the terms and conditions of this contract at any time and for any reason."

In other words, that 0% interest rate teaser, low interest rate or low fees advertised in bold letters on the front of the advertisement or on the envelope in many instances is simply not worth the paper it is written on.

These bait and switch tactics, otherwise known as "universal default," has allowed credit card companies to charge usurious interest rates and outrageous fees allowing credit card companies to post huge profits year after year. In fact, credit card issuers' net profits in 2006 were $36.8 billion, up from $35.7 billion the year before.

As the economy worsens and credit becomes tighter, Congress is beginning to shine a brighter light on credit card rip-offs, but much more needs to be done to provide real protections aginst credit card scams.

To that end, Sanders is a cosponsor of legislation introduced in the Senate by Senator Carl Levin. The Stop Unfair Practices in Credit Cards Act would make five major reforms that would directly benefit consumers.

First, the bill would prohibit the practice of charging higher interest rates on balances incurred prior to when the rate increase went into effect.

Second, it would cap interest rate hikes. Interest charges could go up only 7 percent above the previous rate that was charged.

Third, the legislation would allow over-limit fees to be charged only once unless the credit card user continued to increase their balance above the account limit.

Fourth, credit card companies could not charge fees to consumers choosing to pay their bill.

Fifth, the bill would prohibit charges on balances that have been paid on time.

The legislation is supported by Consumer Action, Consumer Federation of America, Consumers Union, National Consumer Law Center, U.S. PIRG, and the Center for Responsible Lending.