Consumer Credit Act of 2005

The Consumer Credit Act of 2005 (H.R. 3492) sought to amend the Truth in Lending Act to prohibit creditors from raising annual interest rates to consumers based on adverse information gathered from credit reports. According to Bankrate, credit card companies could raise interest rates based on late payments to other creditors, regardless of the consumer's payment history with the credit company itself. AT&T Universal Card, Citibank and Capital One are mentioned as companies that employed this practice.

History

The legislation was introduced for the second time by U.S. Rep. Bernard Sanders of Vermont in July 2005 and was sent to the subcommittee on Financial Institutions and Consumer Credit a month later. In addition to prohibiting the practice of raising interest rates due to late payments to unrelated accounts, the bill sought to expand disclosures to the consumer in clear language and required creditors to notify consumers of any intended increase in rates or imposition of fees. The bill was never passed.

Consumer Protection Act of 2005

The Consumer Credit Act was not passed in 2005, but the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was passed. Although the bill contains the phrase "Consumer Protection Act," it was in fact a bill to benefit creditors rather than consumers. "While U.S. bankruptcy law was very debtor-friendly prior to BAPCPA, it has become much more pro-creditor today," reported the Washington Post. The bill makes it more difficult for consumers to file for bankruptcy and makes it easier for creditors to collect debts.

Descendant of the Consumer Credit Act of 2005

The Credit Card Act of 2009 contained most of the provisions of the previous Consumer Credit Act of 2005. According to Open Congress, the purpose of the Credit Card Act of 2009 closely matched the purpose of the 2005 bill: "To amend the Truth in Lending Act to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan, and for other purposes." The bill sought to establish transparency in consumer credit practices by eliminating unfair rate hikes and hidden penalties and fees. The bill was passed on May 22, 2009 with bipartisan support, and is now law.

Effects

The Credit Card Act of 2009 requires companies to inform customers of planned rate increases and fees, mandates set payment dates, limits penalties for exceeding credit limits, and requires clear explanations of charges on billing statements. These provisions fulfill the earlier goals of the Consumer Credit Card Act of 2005. In addition, the 2009 law cracks downs on deceptive marketing to young adults obtaining their first credit card and bans the practice of double-billing (using the average balance over past two billing periods rather than the actual previous balance).

Interest Rate Limits

Sen. Bernie Sanders, the original sponsor of the Consumer Credit Act of 2005, sought to put a limit on interest rates that credit card companies can charge when the 2009 legislation was being debated. "When banks are charging 30 percent interest rates, they are not making credit available...they are engaged in loan-sharking," he told the New York Times. Sanders was unable to garner the votes to include this provision in the 2009 legislation.