Delegate Bill Frick Comments on Credit Card Vampires

By Delegate Bill Frick (D-16).

Thank you for sharing your experience at the hands of credit card vampires with MPW readers. The situation you faced is exactly what motivated me to introduce House Bill 1048 in the 2009 legislative session.

Like you, many thousands of Americans are discovering that the major credit card companies are jacking up their interest rates to astonishing levels, often more than double the rate the customer previously enjoyed. In most instances, these increases are being made to consumers that have always behaved responsibly – like you they have not missed payments and have not engaged in risky behavior to justify these dramatic changes. Even worse, the rate increases are not limited to future charges. The increases also apply to existing balances that consumers incurred in reliance on the lower rate.

It is important to remember that credit card companies do not profit from responsible lending. With credit cards, the most credit-worthy borrowers never carry a balance and therefore never pay interest. The credit card companies make their money from those borrowers that cannot afford to eliminate their debt, and are stuck paying monthly finance charges and other fees. Not surprisingly, when the economy faltered last year and many Americans lost their jobs, credit card defaults skyrocketed. In need of cash, the card companies began jacking up rates on everyone.

My bill would have prevented many of the worst abuses. We would have required banks to live up to the terms of their deals with consumers, but preserved their right to make prospective changes to account for bona fide changes in risk. We knew that federal law would eventually catch up with the rampant abuses, but we also knew that those changes would not come until 2010, long after many Marylanders had been victimized by the card companies. To help protect our consumers, the House of Delegate passed HB 1048 by a 136-1 vote. The Maryland Senate, however, killed the bill. Based on comments from one Senator on this blog, the Committee believed the banks’ allegations about the scope of my bill and preferred to wait until July 2010 for federal protections to take effect.

I’m sorry to say that we were right on this one. After Congress passed federal legislation on this subject with a 2010 effective date, the credit card companies began raising interest rates on millions of existing cardholders. Like you, the federal rules will be too late to protect most cardholders from these abuses. Had H.B. 1048 passed, Marylanders would have been protected.

Thanks to Congress, this battle is essentially over. But I know that there are many more rampant abuses of consumers and businesses in the world of credit. For example, why do businesses pay such enormous interchange fees to Visa and Mastercard – fees that increase costs to consumers? Why do tax preparation firms like H&R Block or Jackson Hewitt charge outrageous interest rates to our poorest taxpayers for access to their own tax refunds, when those loans have zero risk?

In this session and beyond, I hope to tackle some of these issues. I hope that with your support and others, we’ll be able to provide vital protections to Marylanders.