Lawmakers consider tighter rules for credit card companies

A bill has been introduced in the House that would impose stricter rules on how credit card companies set interest rates and charge fees to consumers. House members are debating the Credit Cardholders’ Bill of Rights Act of 2009, introduced by Rep. Carolyn Maloney, D-NY, who chairs the House Financial Institutions and Consumer Credit Subcommittee. The bill would require that a credit card company give 45 days’ notice of any rate increase and allow consumers to set their own credit limits. It would also end “double-cycle billing,” in which companies charge interest on debt that consumers have already paid on time and prevent companies from retroactively increasing rates. Similar legislation was introduced in the Senate last month. Any measures that improve consumer education would be important, said Doug Babcock, vice president at Professional Financial Management Inc. of Bozeman, Mont., which has $50 million in assets under management. He advocates simplifying fee and disclosure statements that accompany the credit agreements sent to consumers. “People look at it as instant money,” Mr. Babcock said. “They may think I can pay off this card with another card and then they get into credit card roulette. You have to read the agreement and understand what the interest rates are and the cutoff dates.” More legislation is not the best plan for dealing with credit card debt issues, said Steve Gorman, president of Gorman Financial Management of Hingham, Mass., which has more than $100 million in assets under advisement. “If you believe that the government is going to fix your credit woes, then you may fall behind thinking that you are going to get help,” Mr. Gorman said. “It could become a self-fulfilling prophecy. It could encourage people to become less responsible with their debt.”