Mild Skepticism: Credit Card Bill of Rights Edition
Well, we can all rest assured that H.R. 627, the Credit Cardholders’ Bill of Rights Act of 2009, will indeed pass. I’ve been a huge advocate of strengthening consumer protection in the past, so this is a welcomed change. However, I’m worried that legislators have managed to put restrictions and requirements on credit card companies without taking the last step: making them ineligible to be waived in boiler-plate language. Or, more importantly, the difference between “opt out” and “opt in” … From the text of the bill:
‘(k) Opt-in Required for Over-the-Limit Transactions if Fees Are Imposed-
‘(1) IN GENERAL- In the case of any credit card account under an open end consumer credit plan under which an over-the-limit fee may be imposed by the creditor for any extension of credit in excess of the amount of credit authorized to be extended under such account, no such fee shall be charged, unless the consumer has expressly elected to permit the creditor, with respect to such account, to complete transactions involving the extension of credit under such account in excess of the amount of credit authorized.
‘(2) DISCLOSURE BY CREDITOR- No election by a consumer under paragraph (1) shall take effect unless the consumer, before making such election, received a notice from the creditor of any over-the-limit fee in the form and manner, and at the time, determined by the Board. If the consumer makes the election referred to in paragraph (1), the creditor shall provide notice to the consumer of the right to revoke the election, in the form prescribed by the Board, in any periodic statement that includes notice of the imposition of an over-the-limit fee during the period covered by the statement.
‘(3) FORM OF ELECTION- A consumer may make or revoke the election referred to in paragraph (1) orally, electronically, or in writing, pursuant to regulations prescribed by the Board. The Board shall prescribe regulations to ensure that the same options are available for both making and revoking such election.
‘(4) TIME OF ELECTION- A consumer may make the election referred to in paragraph (1) at any time, and such election shall be effective until the election is revoked in the manner prescribed under paragraph (3).
(Emphasis mine.)
Now, you’ll notice that any election remains in force until one revokes it. Also, you’ll notice that there are periodic disclosure requirements. For educated consumers (for example, readers of The Consumerist or the Wall St. Journal’s personal finance blog “The Wallet”) this should sound familiar. It’s well established that credit cards already contain language describing how they treat information they collect on you–most sell or share this information. As this FDIC page says, though, you can usually opt out. Raise your hand if you’ve ever, in all your time on this round ball of dirt, seen how to opt out or been told of this ability by anyone (other than me, just now). If more than 0.5% of you are raising your hand, there are liars galore reading. Now, opting out on those particular issue is a different animal–there are lots of forms of information sharing you cannot opt out of. In fact, credit bureaus can sell your information too. (Wouldn’t it be nice if this legislation fixed these practices as well?) Despite these differences, the point remains that opt in protections can be abused and aren’t really protections at all. As a matter of fact, it would be nice if we saw protections that were non–waive-able.
Just goes to show that, even when considering laws strengthening consumers’ protection against abusive practices, it pays to read the fine print.
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Dear John Thain 
May 21, 2009 at 12:01 pm
Aren’t you overlooking an important distinction between the focus of your post and the example of over-the-limit credit card fees?
Yes, people don’t do opt-ins, but that doesn’t mean they’re bad in all cases. It means they’re bad when we want to encourage people to use them but actually good when we don’t want to encourage people to use them.
We don’t want people to opt in to egregious over-the-limit fees (oh, how I curse them!), so opt-ins might be good.
May 21, 2009 at 5:42 pm
FivEl,
I’m not sure exactly what you’re driving at. Opt in and opt out are totally indistinguishable when one considers that opening any account in this day and age requires you to sign some boilerplate legalese.
The credit card bill requires that one explicitly allow over-the-limit fees, but I’m sure the boilerplate legalese that one signs when opening a credit card account will do that for you. And, can anyone really police this? Not likely. We already have tons of rights that come by default, but which companies are nice enough to relieve us of when do just about anything. The Consumerist has covered one such phenomenon, mandatory binding arbitration, in depth.
-DJT
June 5, 2009 at 10:54 pm
You hit the nail on the head; keep up the good work!
It seems to me that legislators generally leave enough of a loophole in their legislation for the market to find a way to work. For example: for prohibition, they didn’t make it illegal to consume alcohol… the same way that they are not making overdraft fees illegal now.
December 3, 2009 at 8:18 pm
As we near the effective date of the statute, I wonder just how much it will help consumers. It seems that the result of the Act has been to cause card issuers to raise rates, reduce credit, and even close accounts. It seems as if the Act is kind of like an expensive insurance policy. It protects us from some abusive acts by card issuers, but at a substantial cost.