Common Dreams NewsCenter

We Can't Do It Without You!

Home | About Us | Donate | Signup | Archives | Search

Home > Progressive Community > NewsWire > For Immediate Release
Printer Friendly Version E-Mail This Article

OCTOBER 12, 2006
10:52 AM

Timothy Rusch, 917-399-0236, or , or Cindy Zeldin, 202-956-5144, or
Demos Statement on GAO Study: Report Confirms What Families Already Feel: Credit Card Fees, Interest Rates Are Out of Control

NEW YORK - October 12 - Today Tamara Draut, director of the Economic Opportunity Program at Demos, a non- partisan public policy and research organization, issued the following statement regarding the release of a U.S. Government Accountability Office report analyzing credit card fees, interest rates and related disclosure provided to consumers. The report, requested by and released by Sen. Carl Levin, is the first federal study to compile in a single place a description of the recent fees, interest rates and disclosure practices of 28 popular credit cards from the six largest credit card issuers.

"This report confirms what our years of research have shown us, and what American families are feeling across the country as they try to make ends meet: Credit card issuers are out of control and using the fragile economic conditions of America's households to send profits through the roof.

"Since the industry has been almost totally deregulated following two Supreme Court cases -- one in 1979 and the other in 1996, issuers have steadily increased fees and interest rates for most cardholders, and penalties have skyrocketed for almost all - - well beyond the limits of traditional lending institutions. During the same time, greater economic vulnerability and risk have been introduced into the family budget as our nation's promise of a stable, accessible middle class has become endangered. For instance:

-- Credit card debt has more than tripled since 1990 to over $800 billion in 2005.

-- Between 2001 and 2005, Americans cashed out nearly $500 billion in home equity to free up needed cash, often to pay-off high-cost credit, but depleting a families most essential asset

-- A recent survey of low- and moderate-income Americans with credit card debt by Demos and the Center for Responsible Lending found that basic necessities like car repairs, home repairs, and medical expenses contributed to credit card debt.

-- Nearly half (46 percent) of all households had credit card debt in 2004.

"Moreover, credit card companies reaped the benefits of steep declines in the Federal reserve rate in the 90's, but deliberately didn't pass the savings on to their customers -- and instead raised penalty rates and fees dramatically. It's time to reverse this trend.

"One thing we could do is ask Congress to take serious action to protect consumers from deceptive credit card terms and exorbitant interest rates and fees by passing a Borrower's Security Act that would restore the balance of power in the lending relationship. A Borrower's Security Act should:

-- Prohibit credit card companies from raising a cardholder's interest rate based solely on payments to other creditors.

-- Provide a late-payment grace period of at least five days before fees or interest rate hikes can be assessed.

-- Limit rate increases to 10 percent above the cardholder's original rate and to new transactions only.

-- Require disclosure of the full costs of only making minimum payments and raise the minimum payment requirement to 5 percent of the total balance for new cardholders.

-- Require credit cards issued to individuals under age 21 to have a co-signer, unless they can prove they have independent means of support.

"It's time to give America's families, rather than credit card issuers, a break for a change."


Printer Friendly Version E-Mail This Article
Common Dreams NewsCenter is a non-profit news service
providing breaking news and views for the Progressive Community.

The press release posted here has been provided to Common Dreams NewsWire by one of the many progressive organizations who make up America's Progressive Community. If you wish to comment on this press release or would like more information, please contact the organization directly.
*all times Eastern US (GMT-5:00)

Making News?
Read our Guidelines for Submitting News Releases is an Internet-based progressive news and grassroots activism organization, founded in 1997.
We are a nonprofit, progressive, independent and nonpartisan organization.

Home | About Us | Donate | Signup | Archives | Search

To inform. To inspire. To ignite change for the common good.