CONSUMER PROTECTION

Senator Levin has fought for legislative measures that protect the interests of consumers and taxpayers. In this section of the website, you can read about his investigation into the causes of spikes in gasoline prices and his work to end the federal prison industry monopoly on government contracting to ensure that taxpayer dollars are used most effectively. You can also get information on reducing junk mail, spam and telemarketing calls from the Reducing Junk Mail Guide in the Resources section of this website.

Through his role as Chairman of the Permanent Subcommittee on Investigations, Senator Levin initiated an investigation into unfair practices within the credit card industry. As part of this investigation, Senator Levin commissioned a report by the Government Accountability Office (GAO) that was released in September 2006 and chaired a hearing in March 2007 that focused on three fundamental issues: grace periods, interest rates, and fees.

Grace Periods. Although many consumers think that all credit cards provide them with a grace period before interest is charged, the investigation disclosed that, in fact, most credit card issuers do not provide a grace period to cardholders unless they pay their credit card balances in full each month. If a consumer owes any balance on a card from the prior month, there is no grace period on new purchases -- every purchase racks up interest charges from day one.

Interest Rates. Credit card issuers typically apply multiple interest rates to the same card, depending on the circumstances. For example, the credit card industry typically uses one interest rate for cash advances, another for regular purchases, a third for balance transfers, and if a cardholder pays late or exceeds a credit limit, the company may substitute a so-called penalty interest rate that can exceed 30 percent. These interest rates may vary if they rise and fall with the prime rate. Multiple interest rates that change over time make it nearly impossible for consumers to track their finance charges. In addition, when a consumer pays off a portion - or even the majority - of a monthly balance, the investigation disclosed that credit card issuers charge interest on the entire amount previously owed, including the portion that was paid on time. Sen. Levin believes it is indefensible to charge interest on money that is paid on time.

Fees. In addition to interest, a host of fees are imposed by the credit card industry, including late fees, over-limit fees, and fees charged for paying a bill over the telephone. The March 2007 hearing featured an Ohio consumer who exceeded the limit on his card three times for a total of $200, but was then charged 47 over-limit fees totaling $1,500, an amount seven times greater than the amount for which he was being penalized. This example illustrates the use of excessive fees in the credit card industry. These high fees are made worse by the industry practice of including all fees in a consumer's outstanding balance so that they incur added interest.

On May 15, 2007, Senator Levin introduced the Stop Unfair Practices in Credit Cards Act, S. 1395, [PDF] in an effort to ban the unfair practices exposed in this investigation and to protect consumers who seek to pay off their debts in good faith. If passed, this law would stop credit card companies from charging interest on debt that is paid on time; it would crack down on abusive fees, including late fees, over-the-limit fees, and fees to pay a bill; it would prohibit the charging of interest on fees; it would establish guidelines on interest rate increases, including a cap on penalty interest rate hikes at no more than seven percent; and it would require that increased interest rates apply only to future credit card debt, and not to debt already incurred.

Senator Levin plans to hold more hearings on other unfair credit card practices. If you would like to tell Senator Levin's investigative staff about an unfair credit card practice that you have experienced, please send an e-mail to creditcards@hsgac.senate.gov.

More Information on the Credit Card Industry Investigation:

• Senator Levin's press statement on the Federal Reserve proposal to improve credit card disclosures - May 23, 2007
• Press release on the introduction of S. 1395 - May 15, 2007
• Summary of the Stop Unfair Practices in Credit Cards Act, S. 1395 - May 15, 2007
• The Stop Unfair Practices in Credit Cards Act, S. 1395 [PDF] - May 15, 2007
• Senator Levin's Senate floor statement introducing S. 1395 - May 15, 2007
• Senator Levin's opening statement at the credit card hearing - March 7, 2007.
• Press release summarizing the credit card hearing - March 7, 2007.
• GAO report commissioned by Senator Levin about credit card practices - September 2006. [PDF]

Additional Resources

If you have a specific credit card problem and would like to seek immediate help, you may want to consider contacting Consumer Action. Consumer Action is a national, non-profit education and advocacy organization that provides free, non-legal advice and referrals on a number of consumer issues, including credit cards.

To get help from Consumer Action, you must leave a message with their hotline either by phone, online or email. There will not be a live person when you leave the message, but they will have a counselor review your complaint and follow up with you.

A complaint may be submitted to the Consumer Action hotline by:

• Consumer Action telephone: 415-777-9635
• Consumer Action online complaint form
• E-mail: hotline@consumer-action.org