In the midst of a heated debate over credit card reform, the New York Times has come down on the side of the reformers. In an editorial published Saturday, the newspaper urges Congress to pass new regulations, such as Rep. Carolyn Maloney's cardholder's bill of rights:
Before more Americans get in so deep that they cannot dig out, Washington needs to change the way these companies do business to ensure that consumers are treated fairly.
The stories about deceptive practices are harrowing. At a recent news briefing in Washington, a Chicago man told about what happened when he charged a $12,000 home repair bill in 2000 on a card with an introductory interest rate of 4.25 percent. Despite his steady, on-time payments, the rate is now nearly 25 percent. And despite paying at least $15,360, he said that he had only paid off about $800 of his original debt....
Americans deserve better. Senator Carl Levin, Democrat of Michigan, has been pushing hard for more consumer protections. Representative Carolyn Maloney, Democrat of New York, has put together an excellent first step with a cardholder's bill of rights. It would require such reasonable changes as a ban on collection of interest on amounts already paid. It would require that cardholders get timely notices of changes in their rates and be able to cancel their cards if the rates suddenly skyrocket—and pay off the balances at the old rates.
The editorial doesn't mention it, but Democratic Sens. Ron Wyden of Oregon and Barack Obama of Illinois also have proposed a more market-friendly approach that avoids capping interest rates but promotes consumer knowledge through a five-star rating system.
As these competing proposals and their supporters duke it out, one thing seems clear: The public call for change is getting louder. Credit reform seems almost inevitable.