The plastic plague

New legislation sets basic standards for credit card companies to meet

Date published: 4/7/2008

THE PRESIDENT, the Treasury Department, and the Federal Reserve want to overhaul the nation's economic system, but what about the millions of debt-ridden household economies that have helped put the brakes on our nation's growth?

Rep. Carolyn B. Maloney, a New York Democrat, sees the big picture in the smaller day-to-day transactions that have made Americans plastic addicts. She, along with at least 80 co-sponsors, has introduced a bill to provide consumers with a Credit Cardholders' Bill of Rights, designed to provide a clear exchange of information between borrowers and lenders.

Is consumer debt an issue in this country? Consider this:

U.S. consumer debt, which doesn't include mortgages, doubled in the 10 years between 1994 and 2004 to more than $2 trillion. Today it's already $2.5 trillion as the economic downturn causes some to charge necessities like groceries and gasoline.

It would take 15 years of making minimum payments to clear a typical credit-card balance--with no additional charges added--with the card issuer graciously accepting those finance charges month after month.

This environment has been ideal for predatory lenders who take advantage of the poor, uneducated, and elderly. While some borrowers are knowingly charging their way to the American Dream, others are simply naive.

The more people are chained to increasing credit-card payments, the less they are able to save, reducing their ability to meet future expenditures such as college tuition and retirement.

Ms. Maloney's legislation takes a basic approach to lending fairness. For example:

It establishes a 45-day warning period for previously arbitrary rate increases.

It prohibits interest charges from being applied to debt for which payments are made on time, combating a practice called "double-cycle billing."

It prohibits the use of deceptive terms and language.

It reins in the excessive fees that credit-card companies are now allowed to charge.

It directs Congress to better police the credit-card industry.

Common sense dictates that the relationship between Americans and their lenders be clear and above-board. Ms. Maloney's legislation appears to be a good move for Congress to make.

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Date published: 4/7/2008