U.S. Rep. Nita Lowey today called for Congress to pass federal legislation that would stop credit card companies from engaging in billing practices that make it harder for consumers to escape a vicious cycle of debt.
â€œCredit card companies should not be permitted to use deceptive and unfair billing practices that can put financial security out of reach, especially for college students who are being forced to start their financial independence severely in the red,â€ Lowey, a Harrison Democrat, said in a written statement.
The average outstanding balance on the credit cards of college undergraduates is $2,169, and the average interest rate for standard bank credit cards topped 19 percent last year, according to Lowey.
Lowey criticized the industry for practices that include â€œuniversal default,â€ or interest rate increases based on a cardholderâ€™s other accounts, and â€œdouble-cycle billing,â€ or assessing interest on all charges made in a month when the entire balance is not paid in full.
Companies also may offer introductory interest rates that rise dramatically without the cardholderâ€™s knowledge.
Lowey called for Congress to pass the Credit Cardholdersâ€™ Bill of Rights Act that would prohibit universal default and double-cycle billing. It would also prevent credit card companies from unfairly targeting minors, require 45-day notice of interest rate increases, and allow cardholders to set a ceiling on their credit limit, preventing students from falling heavily into debt.
The legislation has been approved by the House Financial Services Committee and may be considered by the House of Representatives during the next two weeks.