Prohibits the issuer of a credit card from increasing the rate of interest or imposing a fee on the account of a holder who has made timely payments and in the minimum amounts required, based on such holder's indebtedness or failure to make timely payments to another creditor; violation of such prohibition shall constitute a misdemeanor.
BILL NUMBER: S47
TITLE OF BILL : An act to amend the general business law, in relation to prohibiting issuers of credit cards from increasing the rate of interest imposed upon outstanding balance based upon a holder's indebtedness or late payments to other creditors
PURPOSE OR GENERAL IDEA OF BILL : This legislation will prohibit credit card issuers from increasing the interest rates they charge on their credit cards based on irrelevant financial activity of the credit card holder.
SUMMARY OF SPECIFIC PROVISIONS : This bill would add a new section 515-a to the General Business Law prohibiting issuers of credit cards from increasing the rate of interest or imposing a fee upon the outstanding balance owed by a holder solely due to the card holders indebtedness or failure to make timely payments to any other creditor.
A violation of this section would constitute a misdemeanor.
JUSTIFICATION : A late payment on a telephone bill could cause the interest rate on a credit card to soar. According to Bank rate, Inc., a source for consumer information about financial services, an increasing number of card companies punish credit card holders for late payments to other companies, even if the card holder has never been late on a payment to the credit card issuer.
For many consumers, interest rates on their credit cards have skyrocketed and most if not all consumers are unaware that credit card companies are basing the interest rate on future irrelevant financial activity of the card holder.
Consumers are under attack by corporations that create schemes to overcharge them in order to increase corporate profits. The practice of raising interest rates on card holders for non-related financial activity is commonly referred to in the small print of credit card agreements as "Universal Default."
Anyone reading through the extremely fine detail of these credit card agreements is sure to miss the sections that spell out that the rate of interest on their credit cards will be impacted by late payments to other entities. Most consumers don't know that this practice exists.
Missed payments that can affect the interest rate on a credit card include utility companies, water bill, tax bill, payment to other lenders, auto loans, mortgage loans, and student loans. The banking industry says that Universal Default makes sense because it signals that a customer could be a risk to them. Anti-consumer schemes like Universal Default are ripping-off unsuspecting consumers and is a disturbing intrusion into the private matters of the credit card holder.
Everyone concerned with the overreaching actions of government should be extremely alarmed by these schemes cooked-up by private corporations that amount to an invasion of privacy never before seen in the history of our democracy.
Under the disguise of good business practices, banking and insurance companies are developing financial practices that penalize everyone but the very rich in our society. This practice must be banned in New York State.
PRIOR LEGISLATIVE HISTORY : 2005 Rules Committee, 2006 Veto memo 320 (S.5665-A/A.809) 2007 Veto memo 109 (S.2969-B/A.5325-C) 2008 Veto memo 165 (S.7339/A.10448-a)
FISCAL IMPLICATIONS : None.
EFFECTIVE DATE : This act shall take effect on the first day of the calendar month which commences next succeeding the date on which it shall have become a law.
STATE OF NEW YORK ________________________________________________________________________ 47 2009-2010 Regular Sessions IN SENATE (PREFILED) January 7, 2009 ___________Introduced by Sen. FUSCHILLO -- read twice and ordered printed, and when printed to be committed to the Committee on Consumer Protection AN ACT to amend the general business law, in relation to prohibiting issuers of credit cards from increasing the rate of interest imposed upon outstanding balance based upon a holder's indebtedness or late payments to other creditors THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The general business law is amended by adding a new section 515-a to read as follows: S 515-A. INCREASING RATE OF INTEREST OR IMPOSITION OF FEES FOR INDEBT- EDNESS TO OTHER CREDITORS. 1. NO ISSUER SHALL INCREASE THE RATE OF INTEREST UPON THE ACCOUNT OF THE HOLDER OR IMPOSE A FEE UPON THE OUTSTANDING BALANCE OWED BY A HOLDER WHEN THE INCREASED RATE OF INTEREST OR THE IMPOSITION OF A FEE IS SOLELY THE RESULT OF THE HOLDER'S INDEBT- EDNESS OR FAILURE TO MAKE TIMELY PAYMENTS TO ANY OTHER CREDITOR OR CRED- ITORS. 2. A VIOLATION OF SUBDIVISION ONE OF THIS SECTION SHALL CONSTITUTE A MISDEMEANOR. S 2. This act shall take effect on the first day of the calendar month which commences next succeeding the date on which it shall have become a law.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD00949-01-9