Kill Bill Pai

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New Credit Card Laws Give Cardholders a More Effective Bill of Rights

In recent months, there have been several strong attempts to update laws that banks must follow when issuing credit cards to consumers. A bill, “Credit Cardholders’ Bill of Rights Act of 2009,” was recently passed by the United States House of Representatives, and has been sent to the Senate for approval where it looks to be similarly successful. While President Barack Obama has declined to comment publicly on the bill, many of his recent attempts to update policy suggest that he is very much in favor of bank reform, and if the bill passes the Senate, it is expected to be signed into law.

While there are many proposed changes to current law in the bill, it appears to be a bill that is very much pro-consumer. Republican Congressman Hensarling of Texas has proposed two amendments to the bill; both of which favored the credit card companies and both were rejected by the House. Until the bill has passed the Senate, amendments can still be added and returned to the House, but the bill that was sent to the Senate was full of amendments to protect the consumers; law makers and consumer-advocacy groups seem to be very happy with the bill.

One example of reform includes the way in which payments are applied to accounts. At this time, most banks apply payments to the balances with the lowest interest rates first. Meaning, if you have a balance of $10,000 with half of it at an interest rate of 3% and the other half at an interest rate of 25% you have to pay off $5,000 before any of your payments start cutting down the amount you are being charged 25% interest on. Meaning, essentially, it is very difficult to get your balance down as you must pay 25% interest on $5,000 every month until you have less than a $5,000 balance. In the new bill, banks must apply your payments to the highest interest rates first, or pro-rate your payment to appropriate interest rate balances. This way you are charged less in finance charges and are able to pay off your balances more quickly. However, this also means that low interest balance transfer offers are less profitable to banks, and therefore, many banks are expected to cease those enticing offers.

For a full list of the changes that credit card companies would have to adhere to, please visit

For up to date information on the status of the bill and the status of proposed amendments, please visit our 2009 Credit Card Reform Bill page that is linked to from our home page.

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