Besides just being more fair, this will hopefully force companies to do real underwriting and offer the right price of credit upfront, instead of offering silly 0% teaser rates that turn into 29% with a minor infraction.

i guess the information is supposed to bleed thru, but i've yet to see any indication that any of that is occurring. i know it would make my job a lot easier - between reporting to all 3 & the nightmare that is "e-oscar", a central repository would be AWESOME from a lending standpoint.

of course, then they wouldn't be able to justify charging twice as much for a tri-merge if that were the case.

@PopulistOutrage:

I'm not quite clear on how us responsible consumers will be hurt by a bill meant to protect all consumers.

Remind me again how this hurts me?

"Requires credit card statements to be mailed 21 days before the bill is due rather than the current 14."

I'd be happy to have the 14 days.

Of course, it also helps that statistically the vast majority of individuals will pay their bills.

I've also found it rather suspect that between the three bureaus you can have 50-100 point score swings. Sure, back in the day, it used to be about "regional reporting differences" when it really took some effort to mail data tapes to regional credit bureaus in order to compile the data to make a credit file. So maybe you didn't choose to mail to all three...but nowadays, the three should be doing everything from a central reporting repository and the ONLY difference between the three should be in their alert products.

Don't even get me started on people that can fix sub-600 scores to over 700 in less than a year...the fact that you can do that and your score is supposedly design to do a long-term prediction of your long-term liklihood of repayment...

I don't think there's much of a change from 18-21. You're still a dumbass at that age, except now you can charge alcohol legally at a bar. That won't help your balance.

1. No mention of a usury (setting a maximum interest rate)law or even concept;

2. No link between minimum monthly payment and date of last payment (at that payment rate).

What ever happened to spending within your means?

Now don't get me wrong, I made a big mistake with credit cards when I was younger, and I learned the hard way that credit card debt is not a good thing. What did I do? I reduced my spending, paid off my bills, and never did it again!

Having this legislation is not going to teach people how to spend wisely.

@mrgenius: Shh, your not playing by the new consumierst party line. Your just have to hate the banks and want to regulate them out of existence. Anything else will get the hysterical populist responses you can see here.

Great example of trampling on those who take their credit cards and buy things responsibily in order to help those who buy things they cannot afford. Apparently Consumerist has become DeadBeatConsumerist, because those consumers who are responsible will only get hurt by this bill.

What political lobbying group is funding you, Ben?

@lilyHaze:

My issue isn't as much that they're required to show income, its that your singeling out a specific group of people by age. Yes, young people are stupid. So are older people. If they're going to require you to show proof of income or have someone vouch for you to get a C.C, I think that should apply across the board and not just to 18-21 year olds because there are plenty of stupidity to go around in every age group. Or, maybe make a rule that if you have no credit history you need a voucher/proof of income? I'm not opposed to the measure, just how specifically they're targeting it.

So that credit card you get at 18 can have some problematic issues downstream for other lenders as well. Fair Isaacs offers scoring on pretty thin files, but they swear that a 740 thin file customer is the same as a 740 customer with 50 trade lines. So if you're 19 and you have your 3 credit cards for 18 months and you've managed to keep up with some minimum payments, you can get auto-approved for a lot more...

And this is where the issue starts. You'll get preapproval offers for more cards, you can potentially get auto approved for bigger things (cars, furniture, boats, motorcycles) and then you're in a world of hurt. In the preapproval/auto-approval world, creditors are relying heavily on scores + matrices to take care of business.

Yes, Fair Isaacs swears that they've modeled this, but it's kind of crap. But they can't treat the under-21 set too differently either...

You can tell banks to put in tighter controls, but they rely on auto approvals to help their bottom line. If FCRA allowed something as common sense as "let me look at everyone under 25 differently" without putting a lender at risk for age discrimination, that would help. But, hey, we've got to protect people.

There's a whole different discussion for 65+ - people taking advantage of meemaw and peepaw as cosigners are evil.

As for "Prohibits issuers from charging over-limit fees unless the cardholder elects to allow the issuer to complete over-limit transactions," I hope that's on a per-transaction basis.

@ilves:

@ilves I came from a very financially responsible parental-unit situation. they always paid their bills on time and in full. We never talked about money or the implications of spending it-an unfortunate thing for sure, but it's just the way they were brought up as well.

I went to college bright eyed and bushy tailed and was immediately given (by BofA) a card with a $19,000 credit limit. My thoughts? Well even if I max this out, surely I will be able to pay it off when I get out of college with my 50k a year job, no?

Education is critical to using money responsibly. Bottom line. It's also critical to keeping our children from using drugs, getting pregnant before they are ready, driving a car before they are trained, or any number of other milestone types of events. HOWEVER sometimes that education is just NOT GIVEN and "legal adults" are given massive amounts of buying power with no real way to back that buying power up.

I'm not sure I agree with requiring co-payers, but what about written testing? Or actually giving credit based on ability to pay? Nah, the CC companies are just concerned with getting their money back (hence the co-payer/signer) which is their ultimate goal I suppose.

@ilves I came from a very financially responsible parental-unit situation. they always paid their bills on time and in full. We never talked about money or the implications of spending it-an unfortunate thing for sure, but it's just the way they were brought up as well.

I went to college bright eyed and bushy tailed and was immediately given (by BofA) a card with a $19,000 credit limit. My thoughts? Well even if I max this out, surely I will be able to pay it off when I get out of college with my 50k a year job, no?

Education is critical to using money responsibly. Bottom line. It's also critical to keeping our children from using drugs, getting pregnant before they are ready, driving a car before they are trained, or any number of other milestone types of events. HOWEVER sometimes that education is just NOT GIVEN and "legal adults" are given massive amounts of buying power with no real way to back that buying power up.

I'm not sure I agree with requiring co-payers, but what about written testing? Or actually giving credit based on ability to pay? Nah, the CC companies are just concerned with getting their money back (hence the co-payer/signer) which is their ultimate goal I suppose.

@ilves:

Looking back, I almost wished that someone were there blocking me from getting a credit card right out of high school. Back then I was irresponsible, and spent far more than I made. It got me in a hole that was kinda hard to dig out of as a student.

Then when I was 21, I was....still as irresponsible, had spent more than I did back when I was 18, and hey - I was graduating soon! I'll make that money back in no time flat! Five years later...fighting my way out of 6K in debt with a lower paying job.

I don't think there's much of a change from 18-21. You're still a dumbass at that age, except now you can charge alcohol legally at a bar. That won't help your balance.

Not sure I see the point in this one.

What about ditching the binding arbitration stuff too?

I especially like the part about protecting young people from irresponsibility. I'd go even further and require schools to teach classes on money management and basic economics.

OTOH, not many companies do offline CC anymore, it's just too risky.

If you need to be 21 to get your own credit card or buy beer, then you should need to be 21 to buy guns, cigarettes, vote, or serve in the military.

Pick an age you consider someone to be an adult and stick by it. I'm tired of this sliding scale crap.

This is the exception:
•Requires promotional rates to last at least 6 months.

I can't see the value in this. I'd prefer to see promotional rates along with promotion length in the same sentence.
So "0% APR" would have to be "0% APR for 6 months".

And I'd drop it completely for an easy way to transfer your credit line (not the same as a balance transfer).

On the other hand I don't want to see making this or any other legislation/regulation turning the rountine/daily transactions in life into a job interview .

In other words these credit card companies are going to manipulate,bend,twist,contort and fracture these new laws to their advantage . I still think there is too much emphasis on the credit score but it has become a cottage industry in itself . Just the like the debt consolidation/credit counseling industry .

@RStui: which legislators cut what parts .

That is the question . Who is or has been aiding & abetting these credit card companies .

But, on the other paw, students don't always have an income. And credit is based on income.

So, if someone is willing to vouch for you financially, you should be able to learn to use credit responsibly. Yes, students are going to screw up and max out their cards. That's part of learning.
The fallout has to be limited because it's going to affect the 'patron' financially in addition to the beneficiary's credit score.
So, on that basis, I'd agree with this safeguard but open the opportunity to everyone.

Heh, you may be right. Don't want to get to OT, but to me there are big differences between things like, say, universal health care, and things like this. I find it a bit interesting that there has been so little coverage of Obama's health care proposal on this site, which strikes me as so much more pro-consumer than the credit card bill (credit after all being a privilege). So I am a little bleeding heart.

I just think this bill will end up hurting more than helping many consumers in the long run because the banks will be incentivized to basically take their ball and go home, leaving many without access to credit.

Fortunately that was a light month, and he only charged 11k. How much you want to bet the new limit would have cost him an overcharge? He didn't know his limit was cut until he got home and pulled out his mail.

Thank heavens for vacations in one way I guess.

HSBC is pretty dumb too, 3 days so an online payment can be processed? What are you using, a 1960's IBM mainframe that requires punch cards and batch processing?

I'm not disagreeing with you in spirit (as I think the drinking age should be 18 as well) but the precedent exists.

I got a letter in the mail from Bank Of America with whom I have a credit card, telling me that basically for one reason or another, my credit limit has been reduced to $5000. Five freakin' grand! I never knew it was more than $2500 to begin with! Also, I'm unemployed.

They could reduce it down to $500 and I wouldn't care; I rarely put more than a hundred bucks on there anyway. But this, this is just weird..

@Eyebrows McGee (popping ~May 29): While I totally agree that 18 is the age when you become an adult, it's gotten to be a weird thing when people started going to college more. Since the government started giving need-based aid to students, they require that you put your parents' financial info on there because the parents are expected to pay x%.

Instead of limiting it to <21 years without a job, how about for everyone? I think it's fine for an unemployed person to receive 1 low limit CC, but it's when they're allowed ten of those that stuff like this has happened.

Regardless, I'm glad that this is something that everyone can agree on from a common sense point of view instead of a red or blue colored one.

@pecan 3.14159265: That's what I fear will happen to a lot of folks. They'll cut your limit, which might lead in some cases a decrease in credit score. Which might lead to increase in interest rate, and so on.

My main point is that credit card companies WILL MAKE MONEY. It will just that more money will come from up the credit score chain.

@nakedscience: Or at least get a notification if your score materially changes.

Next up on Consumerist... "My Credit Card Company Cut My Limit and It's NOT FAIR! WAAAAAAAAHHHH!"

I swear I don't think I will ever understand why people need all these "protections" because all it will do it restrict credit. The "Young People" provision is a joke. Many people actually are independent at 18 and I don't think it should be up to the government to arbitrarily decide an age at which it is decided that one is now "responsible." As if Chris Dodd of all people should decide that!

People that pay late or have a higher risk of default SHOULD pay more in fees & SHOULD have higher interest rates. It's the way credit of all kinds works, be it credit cards, bonds, or other debt instruments. Otherwise the burden simply shifts to everyone else.

The one great suggestion I did see was the idea that your credit score should be public and free, at least once a year like the annual credit report program. It's important to have all your information at your fingertips. However, it's one's own responsibility to use credit responsibly. It's just not that deep; pay your bills on time or don't use a credit card!

I am a bleeding heart liberal commie pinko or whatever Rush is calling us these days, but I really think this act will have unintended consequences that will screw over more responsible users of credit.

i'd rather they were required to disclose your score as well as your report when you're approved/denied for a loan (they do require this now with home loans).

a lot of consumers don't realize that the score is generally only a small part of the approval process used by lenders. it's imporance lies in the pricing of credit - interest rates are almost exclusively based on credit scores.

I also found this one rather troubling at first. I think the bill is really targeting full time college students who are not yet working. If you are 18 years old with a full time job, then that is the "independent means of repaying any credit extended"; which then means you could get a card without a cosign.

I actually don't think it's a bad idea. The whole practice of CC companies giving college students credit was based on their earning potential after graduation, but that whole dynamic has changed within the past decade. Few college graduates are getting those $75,000+ jobs upon graduation anymore.

making loans to 18-yo's with zero credit & zero income are neither in "good faith" nor "responsible". why cc banks have been allowed to get away with it for this long is beyond me.

this is what this provision is trying to stop. as long as someone under 21 has a means to pay, they can get a card, but if they don't have income, they won't be able to obtain credit without a cosigner. this is how things work everywhere else in the lending world (except maybe student loans). you can't buy a car without proof of income - why would any lender in their right mind issue you a $3000 credit line?

Kiss them goodbye because a bunch of irresponsible idiots drowned themselves in consumer debt and now want the .gov to come and help them out.

@Saboth: Seriously. It's completely ridiculous and unfair that we can't check this stuff for free at will, considering it effects our lives so much.

The credit card companies know this - and they count on that, "but I'll be the responsible one!" mentality. Heck, there's that one guy that makes money in the MLM scam, right? So by that extension, it's a-okay!

The credit cards also count on the "you're too stupid" argument from others to get people to sign under the idea of not wanting to feel dumb. Because calculating your interest on your balance makes complete sense in this environment of arbitrary rate increases - who wouldn't expect to be charged the new interest rate on the old balance? Who wouldn't expect to be charged interest on interest? Who wouldn't expect to be charged interest on fees? Who wouldn't expect to have the card go through when you're close to your limit and then end up being charged multiple fees? Yes, it's innate knowledge you're born with...or that you can easily comprehend from the fine print of your cardholder agreement as you breeze through it at a Spring Break table on the way to the beach.

If you're a responsible person, your parents will sign, right? If you're really super-responsible, there are clauses in all of these for emancipated individuals - so just do the extra paperwork. That will give you all the genuine responsibility you need and allow you to get a card without a co-signer.

You can "nanny state" all you want, but this is a segment that's getting the present of horrible credit upon graduation. In exchange for what? A free cup cozy?

@pecan 3.14159265: But an 18 year old is a LEGAL ADULT. Period.

I only use credit cards for the cash back. I have no balance, so I couldn't care less about APR. What will happen to my benefits if this reform is passed?

It's just easier to require this, because the majority of people under 21 are not independent, and are still under the authority (but not legally) of a parent or guardian. There's always the "as long as you live under my roof..." threat.

i was really pissed off at dodd as well, but as the realities behind some of those backroom deals started to make the light, i've gotten over it.

he's one of the most powerful senators in washington & i'm his constituent. not voting for him doesn't seem very prudent...trading the 10th most senior senator for a freshman? how does that make any sense?

i think we just need to hold his feet to the fire for awhile. politics is politics. he's made some mistakes, but guaranteed we'll lose if he's not around next time they talk about closing down groton or shifting contracts from electric boat & UTC (hamilton standard, pratt whitney & sikorsky - all huge employers in CT).

Mostly good... I'm not so sure on:

"•Requires issuers extending credit to young consumers under the age of 21 to obtain an application that contains: the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt; or proof that the applicant has an independent means of repaying any credit extended;"

Honestly, if you are over 18, and since you are considered legally an adult and capable of making your own decisions, I don't think its fair to those 18-20 year olds who are actually RESPONSIBLE (there are some, trust me, I had a C.C. when I graduated college and never had any problems with it or any debt) to have to jump through hoops to obtain a credit card. I'm ok with making credit card companies be less shady, but arbitrarily making it more difficult for a group of people to obtain one simply because they're considered too stupid to deal with them themselves is over-reaching and becoming a little too nanny-state for me.

I thank Chris Dodd for this... but i still don't like him and won't vote for him next election.

Too bad mos of the beneifts will be stripped out by the CC Lobby.

Prohibits issuers from charging over-limit fees unless the cardholder elects to allow the issuer to complete over-limit transactions;

That's a good one. One thing I did with some excess cash I had recently was pay off 4 of my low limit credit cards, and I haven't touched them in 2 months. (that's amazing for me) I know Suze Orman says hold on to your cash, but in a way I am with saving $100 a month in minimum payments on those. Luckily none have slashed my limit yet. It's nice to see that people are paying attention to some of the ways credit card companies rip off consumers. Unfortunately they are a necessary evil.

WOW, this is great....but. You knew that was coming. Here comes the cynicism.... So I doubt honestly that the Credit Card lobbyist are going to let this version make it even to a vote. The impact on the credit card industry and their free fee charging ways would be way to dramatic...like the recession isn't enough.

Oh, this IS exciting.

Even more exciting will be seeing which legislators cut what parts of the bill, and what the final "swiss cheese" version is.