WASHINGTON, DC – House Financial Institutions and Consumer Credit Subcommittee Chairwoman Carolyn B. Maloney (D-NY) today announced her plans to introduce the “Credit Cardholders’ Bill of Rights Act of 2009” in the House, joining with Sens. Charles Schumer and Mark Udall who are sponsoring the companion legislation in the Senate. This comprehensive credit card reform legislation is aimed at leveling the playing field between credit card companies and consumers and abolishes industry abuses that have been described by regulators as “unfair,” “deceptive” and “anti-competitive.”

Click here to read the full article with details of Ms. Maloney’s Credit Cardholder’s Bill of Rights.

• The APR will only be allowed to increase on existing balances if the minimum payment is not received in thirty days or if the card company sets more than one rate at the time you open the card. An example would be if they offer you a 3% rate for the first six months and it then went to 11% after that period. If you have an existing card they can raise the rate on future purchases, but not old purchases, if they give you forty-five days notice. After July 2010 companies can’t raise your established rates for one year and they must give you forty-five days notice on future purchases.
• The rule insures payments are fairly divided among different balances, which means that if you have cards with different rates with the same company, that company must apply your payment in one of two ways: They must apply the payment to the card with the highest rate, or split the payment evenly on the balance of each card.
• This legislation insures that a company cannot treat a payment as being late unless the bill is mailed or delivered at least twenty-one days before the due date, to give the consumer adequate time to pay the bill. If you pay online, the company must deliver the bill electronically at least twenty-one days before the due date.
• The new rule states that the credit card company cannot reach back to an earlier billing cycle when calculating the interest charge for a current billing cycle.
• The credit card companies cannot charge fees that are more than half the credit limit for opening a credit card; for example, a credit card company would not be able to charge more than $200 fees to open a card with a limit of $400.

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For more detailed information, see:
http://www.creditcardreform.org/learn.html

Citigroup had previously opposed the proposal, which was initiated by Sen. Dick Durbin, D-Illinois. The company’s turnabout is attributed to the recent $45 billion infusion from the U.S. government, who now has the company on a tighter leash.

According to current bankruptcy laws, mortgage holders are not allowed to renegotiate the terms of their mortgages, but this would change under the proposed cramdown legislation. The new bill would allow judges in bankruptcy courts to order reductions in both the interest rates and principal on existing mortgages as well as adjustments to the mortgage repayment timeframe. This would give homeowners the opportunity to reduce their mortgage payments to levels that may be more sustainable and retain ownership of their homes.

In order to qualify for mortgage restructuring under the new proposal, homeowners must be in Chapter 13 bankruptcy proceedings and must certify that they have endeavored to negotiate a mortgage payment reduction with the lender prior to the bankruptcy filing. The provisions of the cramdown bill would apply only to mortgage loans written prior to the date of enactment of the proposed legislation.

Regarding Citigroup’s decision, Senator Durbin stated that;

“This is the breakthrough we’ve been waiting for. To have a major financial institution support this legislation will create an incentive for others to come our way.”

As one of the nation’s biggest mortgage lenders, Citigroup’s endorsement was sought because legislators believed it would increase support from other lenders, thereby ensuring that the measure would have a better chance of passage. However, officials with the Mortgage Bankers Association said in response to Citigroup’s announcement of support that their group remains opposed to the cramdown proposal due to “the destabilizing effect it will have on an already turbulent mortgage market.”

In this recessionary climate, credit-card companies across the board are tightening the reins on card holders to minimize their exposure to risk. Such actions could hurt your credit score and, in turn, your ability to get an auto loan, mortgage or even another credit card. So heading into the holiday shopping season, make sure you’re aware of any changes to your credit-card terms.

In coming weeks, for instance, American Express is instituting a broad-based interest rate hike of 2 to 3 percentage points on card holders. The hikes are the result of an expected rise in charge-offs, or balances written off as not being paid, the company said last month.

Across the industry, credit card charge-off rates rose to 6.8 percent in August, a 48 percent jump from the same period last year. According to Moody’s Investors Service, it was the 20th consecutive year-over-year increase.

Moody’s expects charge-offs across the industry to continue rising into next year, eventually surpassing peak rates seen during past recessions.

Further pressuring credit-card companies are new industry regulations set to be adopted by the Federal Reserve later this year. One proposed regulation, for instance, would ban credit-card companies from raising interest rates on existing balances.

“The new regulations are going to hamstring (card companies’) ability to manage accounts the way they have in the past,” said John Ulzheimer, president of consumer education for Credit.com.

To protect your credit score through these times, keep these points in mind.

Triggers

Even if you’re not doing anything differently, lenders may be clamping down on your account. That’s because credit-card companies are re-evaluating their criteria, said Carol Kaplan, a spokeswoman for the American Bankers Association, an industry group.

In a robust economy, for instance, a $15,000 balance may not have triggered any alarms. Today, it may be reason for a higher rate or a lower credit line, Kaplan said.

Other reasons lenders may tweak terms include late payments, partial payments, exceeding credit limits — even if such behavior didn’t provoke changes before.

Not using your card often enough could also be cause for a change or even prompt the company to close the account.

“The bottom line is, card issuers are looking for a reason to say no. They’re going on defense and minimizing their exposure to risk,” said Greg McBride, senior analyst at Bank-rate.com.

Regulations

Credit card companies also may be changing terms to gird for new regulations set to be adopted by year’s end.

The Federal Reserve is still ironing out the details, but one proposal would ban companies from raising rates on existing balances; hikes only could be applied to future purchases.

“In some cases, we think lenders are taking the opportunity to raise rates now,” said Ruth Susswein, deputy director of national priorities for the advocacy group Consumer Action.

Another proposed regulation would prevent companies from punishing card holders for reasons unrelated to their account. Right now, companies can raise rates or lower limits based on information that shows up on credit reports, such as taking out new loans or defaults on other cards, whether or not such activity had an impact on your credit score.

Some credit-card companies have already stopped engaging in such practices. This year, for instance, Chase stopped automatically raising customers’ interest rates when their credit scores declined. The company says the move wasn’t related to the upcoming regulations.

One way to guard against toughened terms is to keep more than one credit card. That will give you the option to transfer balances or use other cards if one issuer takes action against you, said Ulzheimer of Credit.com.

Checking your credit score periodically to make sure it’s clean also can help fend off unwanted changes. It’s also important to monitor to prevent identity theft.