Oklahoma Senator: State unable to regulate credit card companies

Journal Record, The (Oklahoma City), May 7, 2008 by Janice Francis-Smith

State Sen. Jim Wilson, D-Tahlequah, wanted to draft legislation to prohibit credit card companies from abusing Oklahomans. But when consulting with Senate staff, he learned that federal law prohibits him from doing so.

"We can't do anything about it in the state of Oklahoma because that would interfere with interstate commerce," said Wilson. Though he didn't have a specific constituent in mind, Wilson said he and his colleagues in the Senate have heard time and again from constituents and news outlets about tactics used by credit card companies that may be legal but which test the limits of ethical business dealings.

"I can't paint call credit card companies with a broad brush," said Wilson. Some companies' dealings are above board, said Wilson. But other cases have come to light of cardholders whose interest rate jumped from 7 percent to 30 percent overnight, not because they made a late payment but simply because they opened another credit account, he said.

Credit issuers have lost court battles after it was discovered the company held customers' payments long enough to make them late and to thereby collect a late fee, said Wilson. But other practices, such as poor disclosure of terms, may pass legal muster despite their seeming unfairness.

"Just because you can get by with it doesn't make it right," said Wilson. While he cannot get usury language passed on the state level, Wilson is supporting legislation under currently under consideration by Congress: U.S. House Resolution 5244, known as the Credit Cardholders' Bill of Rights Act of 2008.

The Senate Finance Committee on Tuesday approved Wilson's Senate Resolution 67, urging Congress to pass the Credit Cardholders' Bill of Rights Act. The federal bill would amend the Truth in Lending Act to protect cardholders from certain practices.

A creditor would be prohibited from using any change in a consumer's credit score to justify raising their annual percentage rate. The creditor could not change terms of the agreement until contract renewal except for specific reasons. Advance notice would be required for rate increases.

Consumers would be allowed to cancel a credit card without penalty and to pay the outstanding balance before the effective date of a scheduled rate increase. Creditors would not be allowed to provide information to a consumer reporting agency regarding a new credit account until the consumer has used or activated the new account. The measure would also authorize a consumer to opt out of creditor authorization of over-the-limit transactions and would restrict the frequency of over-the-limit fees, among other provisions.

Wilson said he was somewhat surprised the vote in the Senate committee was not unanimous, but that he expects the support of a clear majority when the measure is heard on the Senate floor.

On the federal level, not everyone on Capitol Hill is in favor of the Credit Cardholders' Bill of Rights Act.

Edward L. Yingling, president and CEO of the American Bankers Association, issued a statement claiming the act would limit card issuers' use of risk-based pricing, which would cause creditors to spread the risk among all cardholders and thereby raise the cost of credit cards for everyone.