Credit card agreements should be written in easy-to-understand language - not in small-print legal jargon. Consumers can make smarter choices about credit card usage when they understand what they are reading, but, right now, credit card companies hide costly fees by issuing incomprehensible contracts.
And, throughout the country, we're seeing middle-class families struggling to climb out of credit card debt. Americans owe a total of $693 billion in credit card debt - with an average balance of $1,809 per household. All who use credit cards should do so responsibly. But responsibility should also extend to the credit card issuers, and that means they should not hide behind small print and pages and pages of legal jargon to disguise from consumers the interest rates, penalties and fees they may face.
For decades, major credit card companies have extracted extraordinary profits from consumers who may not understand the terms and conditions of lengthy credit card agreements. Big banks have hidden unfair credit card terms in language only a contract lawyer can decipher. And without notice, big businesses have raised interest rates or imposed penalties. Americans deserve a consumer cop on the beat who is not marching to the orders of Wall Street executives.
Complex credit card agreements often translate to unsustainable levels of consumer debt and unchecked profits for big credit card companies.
For too long, these special interests have yielded too much power. They employ high power lobbyists who protect the status quo. And largely, they've gotten their way.
Until now. In 2009, I fought to pass the Credit Card Accountability, Responsibility and Disclosure Act (CARD Act) aimed at keeping banks and credit card companies from nickel and diming hard-working Americans and underage consumers. The CARD Act already has helped stem the longstanding practice of hiking interest rates on existing cardholders, reduce the amount of late fees consumers are charged and curtail the abuse of over draft fees. The CARD Act also requires a credit card company to notify a consumer 45 days in advance of a scheduled interest rate increase or other significant change to the terms of the card and provide that cardholder with the chance to cancel the card before the change occurs.
Fact Box
Sen. Sherrod Brown is a senator from Ohio.
And last year, as part of the Wall Street Reform Act, Congress created a Consumer Financial Protection Bureau to give consumers as loud a voice as the Wall Street special interest.
The bureau - a watchdog charged with cracking down on Wall Street's financial tricks and reckless practices - last week in Cleveland unveiled a less complicated credit card agreement. This two-page prototype credit card agreement is written in plain language. It is also much shorter than the average 5,000-word contract now used. With more than 500 million credit cards in circulation across the country - and rising credit card debt - it is imperative that we do a better job of empowering Americans to combat abusive credit card practices.
Last week, I spoke with the associate director of Consumer Financial Protection Bureau, Raj Date, about the importance of strengthening our economy by strengthening consumers' understanding of credit card agreements. He explained how the proposed, simplified credit card agreement would explain in clear terms consumer rights, privacy protection and ways in which billing disputes are handled.
As the chairman of the Senate Subcommittee on Financial Institutions and Consumer Protection, I've been working to improve disclosure to bolster financial stability in households in Ohio and throughout the United States. We've already helped protect Americans from excessive credit card debt and create fairer rules for consumers. This new effort is an extension of that work.
When given the choice between signing a simplified two-page agreement or committing to a stack of difficult-to-understand pages, Americans will make wiser choices about credit card spending - and save money by paying fewer fees. We can eliminate cumbersome contracts and protect cardholders from surprises in their monthly bills. That's why Congress should work closely with Consumer Financial Protection Bureau to help protect American communities from the economic weight of credit card debt.
