News Release

Historic New Credit Card Rules Ban Tricks and Traps, But More Protection Needed

For Immediate Release


The new bans on hair-trigger interest rate increases and other unfair credit card practices that go into effect on Monday, Feb. 22, will be good for consumers, but more protection from the banks and credit card companies is needed, a leading consumer group said this week.

“The Credit CARD Act is an historic reform that will save consumers millions of dollars in unfair credit card fees and interest because of ‘gotcha’ tricks and traps that the industry started imposing about ten years ago,” said Ed Mierzwinski, Consumer Program Director at the Texas Public Interest Research Group (TexPIRRG) during a telephone news conference on Thursday. (Click here to listen to a recording.)

In addition to the hair-trigger rate-increase protection, the new law includes a number of measures that further protect consumers. Among the new regulations, credit card companies will:

  • Have to disclose on the statement how many months and years it will take to pay the current balance as well as the total interest if only the minimum payment is made;
  • Give 45 days advance notice of adverse changes in terms;
  • No longer be able to hand out cards to students who do not prove ability to pay, and
  • Be prohibited from requiring students to fill out credit card applications as a condition of obtaining “free pizza” or cheap trinkets at on-campus marketing tables.

(For a full list of reforms, see the Credit Card Act page on U.S. PIRG’s website. For student-specific information, see the Truth About Credit page.)

Mierzwinski, along with the members of TexPIRG and the organization’s members who played a major role in getting the new law passed, held the telephone news conference with Harvard Law Professor Elizabeth Warren and a student leader from the University of Washington in order to highlight the benefits of the new law on Thursday.

And while they praised the reforms the new law will bring, all three speakers stressed the need for more and better regulation through the proposed new Consumer Financial Protection Agency (CFPA), which has passed the House but faces intense attacks in the Senate.

“Bank fee tricks and traps became major problems because the current bank regulators not only didn’t enforce consumer laws, but also because they viewed the profitable but unfair fees as good for banks,” Mierzwinski added. “That’s why Congress needs to enact the new CFPA.”

Students have been especially vulnerable to credit card tricks, according to Tim Mensing, Student Body President at the University of Washington who also spoke at the news conference. Because of rising tuitions and decreasing financial aid, more and more students are using credit cards. Some even pay part of their tuition bills with them.

“The reforms will protect students by making sure students have to show their ability to pay,” Mensing said.

Harvard Law Professor Elizabeth Warren, who is also Chair of the TARP Congressional Oversight Panel, noted that the CARD Act is “important” and “a good first step.”

“But it isn’t enough alone. The credit card industry and the entire consumer credit industry is broken. We need an agency, a cop on the beat, that is flexible and responsive,” she added.

Banks and credit card companies are already working on ways around the law, Warren added, noting that “the Wall Street banks will always be faster than Congress and they will always have millions of dollars to spend on lobbying to slow down any changes.”

“A CFPA will do something that the CARD Act alone cannot. [Agencies] cannot only respond to new abuses; they can also rationalize and reduce the total number of regulations,” she noted.

Mierzwinski noted that TexPIRG is collecting consumer complaints about bank practices that are in violation of the new law or intended intentionally to evade the new law.

“It's very simple. The historic new law stops the worst current credit card tricks, but without a new sheriff to enforce it, banks will invent new tricks,” he concluded.


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