New Senate Bill Seeks to Punish Banks Charging High Rates of Interest on Credit Card Debt
Written by Craig D. Robins, Esq.
Revising some of the strict measures imposed by the 2005 Bankruptcy Reform Act was the subject of a Senate judiciary committee this week.
Senators heard testimony about alleged credit card abuses Tuesday at a hearing to explore whether changes to the Bankruptcy Code are needed to give borrowers more leverage in negotiations with their creditors. The bill reflects growing anti-banking sentiment.
This proposed Senate bill now aims to undo some of the harsh provisions of the 2005 law. Dubbed the “Consumer Credit Fairness Act,” it was introduced by Senators Sheldon Whitehouse (D-RI) and Dick Durbin (D-IL) as Senate Bill 2359.
The proposed legislation is part of a push by Democrats to provide additional protection to consumers who have been taken advantage of for years by the credit card industry.
Senator Make Harsh Statements Against the Credit Card Industry
In his opening statement, Senator Whitehouse criticized the credit card industry and said “the standard credit card agreement gives the lender the power to bleed their customers through evolving and ever more crafty tricks and traps. The typical credit card agreement, which twenty years ago was a page in length, has grown to a 20-page, small-print contract filled with legalese. In substance, it gives the companies the right to raise interest rates for almost any reason, and in some cases no reason at all.”
Possible Revision to the Bankruptcy Means Test
The new bill seeks to exempt some debtors from the requirements of the means test if the credit card company is charging a very high rate of interest. Under the terms of the proposed Act, if the rate of interest on a debtor’s consumer debts exceed 15 percent plus current rates on 30-year Treasury bonds, they will be able to eliminate these debts in bankruptcy. Such accounts will be labeled, “high cost consumer credit transactions.”
Proposed Law Would Help Long Island Consumers
This bill will have a ways to go before it becomes law. It would be a great help to many of my Long Island bankruptcy clients who suffer from ridiculously high rates of interest on their credit card accounts.
I see a lot of clients who previously had reasonable rates of interest. However, when they missed one monthly payment, their interest rates would double. This proposed law is designed to punish the credit card industry for that practice.