Sleazy credit card tactics under fire

But wait -- there's more.

Both the House and Senate have held hearings on what needs to be done about credit cards. Actual legislation is likely to be introduced in the House later this month, an effort spearheaded by Carolyn Maloney, the New York Democrat who chairs the Financial Institutions Subcommittee and who this summer issued four "gold standard" principles she said should guide future reforms. The four principles are:

• Credit card companies should issue cards on terms individuals can repay.

• Issuers should clearly explain account features, terms and pricing at relevant times.

• Issuers should provide customers notice and choice with respect to changes in terms.

• Issuers should encourage responsible, successful credit use, especially among new credit entrants and customers with special needs.

4 foul plays

None of those principles sounds all that drastic, but the devil will be in the details. You can expect a big push to eliminate the following four "foul play" practices:

Universal default.

Under universal default, your credit card issuer would regularly cruise your credit reports and raise your rates if you were late with another creditor. So an error on your credit report, a misunderstanding over a hospital bill or even a traffic ticket (yes, those go to collections now, too) could result in fantastic rate increases on your card, even if you were up to date in your payments.

Interestingly, this once widespread practice is finally starting to wither. Citibank has publicly renounced it, and other issuers have more quietly followed suit. But an outright ban would prevent this nasty practice from rebounding once the congressional heat is off.

Deceptive billing cycles.

Most issuers play fair by using a single billing cycle to determine how much if any interest you pay on purchases. But some use practices, like double-cycle billing, that cause borrowers to essentially pay interest on charges they've already paid off.

Chase abandoned the practice earlier this year, saying it was "confusing" to consumers.

Anytime, any reason repricing.

The Fed's Regulation Z proposals, if adopted, would slow issuers' ability to change rates, fees and terms, but the card companies could still change the rules on a relative whim.

Forcing issuers to wait until a card expires (typically every two to four years) might impose some discipline.

Pay to pay.

Some issuers charge $15 if you want to make a last-minute payment by phone or on the Web. Given how little these transactions actually cost to complete, the fees are egregious.

If you want to weigh in on what you think Congress should do, contact your House representative and your U.S. senators.

Columns by Liz Pulliam Weston, the Web's most-read personal finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Published Oct. 1, 2007

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