The ‘Credit Card Safety Star Act’ of 2007
New program designed to hold credit card issuers accountable…
Over the past few years, credit card companies have been under increased scrutiny by consumer advocates and lawmakers. The proposed Credit Card Safety Star Act of 2007 is designed to hold them accountable. The new program, introduced by U.S. Senators Ron Wyden (D-OR) and Barack Obama (D-IL), calls for ratings of all major credit card offers by the U.S. Federal Reserve - which will improve the transparency of credit card agreements and encourage issuers to abandon abusive credit card practices.
The new legislation would require that every credit card, billing statement, agreement, application, and piece of marketing material carry the credit card’s ’safety star rating’, which will range anywhere from one to five stars, with five stars representing the safest credit cards. The Credit Card Safety Star Program would be administered by the Federal Reserve and be periodically reevaluated and updated based upon market conditions and the program’s effectiveness. Under the Credit Card Safety Star rating system, it’s expected that most credit cards available on today’s market would rate an average of one or two stars.
“Consumers need some way to know which credit cards are safe and which ones are most likely to get them into financial trouble with fees, penalties, and charges,” Obama said.
Credit card issuers who have hidden fees, unfavorable terms or excessive charges will be given a lower rating - as low as one star. Credit cards that offer clear terms and fair conditions will be rated higher - up to five stars. For example, credit card issuers that can change the terms of an agreement at any time - for any reason - would receive a lower rating; while credit cards that give 90 days notice before terms are changed would get more stars.
“This legislation will help people understand if they can expect their card issuer to treat them fairly, or kick them when they are down,” said Wyden. “With the financial future of so many Americans dependent upon unreadable jargon in credit card documents, arming consumers with usable information is more critical than ever.”
The new program would allow consumers to see upfront what they’re getting into before applying for an offer. When people are able to avoid offers that aren’t in their best interest, credit card companies will be forced to pay attention. The Credit Card Safety Star Act would hold credit card companies accountable for their actions, eventually eliminating many of the questionable practices being used today.
February 22nd, 2008 at 11:52 am
[…] Create a five-star rating system to give consumers a better sense of the rates and fees associated with each card. Star ratings would be displayed with all application materials. See our post on the Credit Card Saftey Star Act of 2007 > […]