Sen. Dodd is chairman of the Senate Banking, Housing and Urban Affairs Committee.

One of my first hearings upon assuming the gavel of the Senate Banking Committee was on a subject that has long been a focus of mine – credit cards. At that hearing, entitled “Examining the Billing, Marketing, and Disclosure Practices of the Credit Card Industry, and Their Impact on Consumers,” I literally put the credit card industry on notice.

I said, to card issuers and companies, if you engage in a practice that is fundamentally unfair, or have policies that you would be ashamed to discuss before this Committee, then you should cease and desist from engaging in those practices and in that conduct moving forward.

That call was intended to allow the credit card industry to conduct a self-examination – in the hopes that the industry would examine its own practices and policies – and would make sure that their terms were fair and their disclosures forthright. And some heeded that call.

In fact, over the past year, some companies have made changes to the way they do business, and many Americans have benefited from these improvements. But regrettably, far too few have embraced this call. And the voluntary measures implemented by the well-intentioned companies are not enough to provide consumers with the adequate protection they need from practices that are wrong and should be prohibited.

Now before I go any further, let me say clearly that I support the use of credit cards. When used wisely, and on fair terms, credit cards can be a valuable financial tool for millions of Americans.

They can help any individual build his or her credit history and to better pursue his or her financial goals.

But like many credit products, credit cards pose the potential to harm consumers rather than help them. That potential has grown in recent years as the financial services industry has grown rapidly and credit was extended on sometimes dubious terms. In 2006, over 700 million credit cards were in use in our country, which is more than 3 cards for every adult American.

And as credit card use has grown, so too have the myriad ways by which credit card companies have sought to profit. Credit card customers today are routinely hit with excessive fees, exorbitant interest rates, and charges for debt that was paid on time. Over $17 billion in penalty fees alone were charged to Americans in 2006, a tenfold increase from what was charged just ten years ago. They can have their credit card interest rates raised even if they have never missed or been late on a payment.

Honest, hard-working Americans frequently have their interest rates increased and applied retroactively to existing debt.

Customers are being buried under an avalanche of credit card debt, much of which can be attributed to the policies and practices instituted by card issuers and banks not as a means to manage their risk, but rather to make a profit. And that motivation is being exacerbated by the need for banks to soften the financial blow to their bottom line resulting from their record losses in the subprime mortgage market.

Unfortunately, those affected the most by these practices are families, who are being squeezed by these fees and costs. Many of whom are already struggling to keep their heads above water, under pressure from rising gas and food prices, skyrocketing health care costs, and a mortgage crisis that has robbed many families of another financial resource – their home equity – or worse yet, their homes.

That is why I am introducing the Credit Card Accountability Responsibility and Disclosure Act (“Credit CARD Act”). This legislation is aimed at stopping abusive credit card practices that drag so many American families further and further into debt. This bill will prohibit a host of unfair and deceptive practices that in far too many instances work to harm, not help, a consumer’s efforts to move up the economic ladder. This legislation will help ensure that American families are treated honestly and fairly by their credit card companies.

Specifically, the CARD Act will eliminate:

The imposition of excessive fees;
Retroactive rate increases;
Universal default;
“Any time any reason” changes to credit card agreements; and
Unfair payment allocation.

The bill also, importantly, contains a number of provisions aimed at protecting young consumers. And it incorporates several key concepts included in the legislative proposals put forth by some of my colleagues, notably Senators Levin, Menendez, Wyden, McCaskill and Obama. And as you can see, it has the considerable support of a wide-array of consumer advocates and labor organizations.

As policymakers, we should expect that consumers will act responsibly when it comes to credit card practices. But we must expect no less of the companies that issue these cards. The time has come to hold them responsible. The CARD Act will ensure just that, and help provide American consumers with a fair chance to secure economic security in their futures.

This entry was posted on Thursday, May 1st, 2008 at 10:34 am and is filed under Politics, Economy/Budget .