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SENATE PASSES MEASURE TO PROTECT CREDIT CARD HOLDERS

FROM THE OFFICE OF SENATOR KENNETH P. LAVALLE

6/5/2008

Senator Kenneth P. LaValle today announced that the Senate has passed a measure that would protect credit cardholder’s from increased interest rates because they made a late payment to another business entity. The bill would prohibit credit card companies that do business in New York from enforcing ‘Universal Default’ provisions against New York cardholders.

According to Senator LaValle, a policy called ‘Universal Default’ is popping up in the small print of credit card agreements and is costing cardholders dearly. The anti-consumer scheme allows credit card companies to increase a cardholders’ interest rate for missed payments to any other creditor, even if they have never been late on a payment to the credit card in question.

Under the guise of good business practices, the banking industry claims that ‘Universal Default’ makes sense because it signals that a customer may be a risk. However, most people don’t read the small print of their credit card agreements and are totally unaware of the practice until they are hit with an outrageous interest rate increase. The practice is overreaching and penalizes the cardholder unnecessarily.

“This is a scheme that credit card companies are using to overcharge consumers and increase corporate profits,” said Senator LaValle. “Examining an individual’s payment history on non-related financial activities for the purpose of inflating interest rates is an invasion of privacy. The measure we passed would protect consumers from being ripped off and eliminate this unwelcome intrusion into their private matters.”