Rutland Herald Editorial Staff
April 15, 2008

Rep. Peter Welch is pushing a bill that would protect consumers from manipulation and exploitation by credit card companies.

Crushing credit card debt might be dismissed as a problem that consumers have brought on themselves. Why should government step in to protect consumers? Isn't it our responsibility to refrain from purchases that put us in a hole?

Though we are all responsible for ourselves and our mistakes, the government also has an interest in protecting people from predatory practices that exploit ignorance and need. The present housing crisis demonstrates the economic damage that ensues when unscrupulous lenders push debt onto borrowers who can't afford it.

Loan sharking has customarily been the province of organized crime, but in recent years major banks and credit card companies have strayed close to the realm of loan sharking as they subject increasing numbers of people to high interest rates and fees hidden in the fine print.

The trickery of credit card companies is becoming more familiar. They move up the billing dates, allowing only a brief period for payment, making people late on their bills and subjecting them to higher interest rates and penalties. They lure people in with a zero percent interest rate, then jack up rates.

Credit card companies also impose merchant fees that consumers may not be aware of. These fees are charged to merchants for each transaction. A gas station is charged 10 to 15 cents per transaction, plus a fee of 2 to 3 percent on the total sale. It can add $2.60 per 20 gallons of gas that goes to the credit card company, according to Welch, and is something most of us probably were not aware of.

We can respond to these abuses by resorting to that old-fashioned method: cash. But we must also recognize that credit cards are now woven into the fabric of commerce in America and require new transparency and fairness.

In a way credit card companies are like insurance companies: They make their money by sticking it to us. Credit card companies made $43 billion from late fees and other fees in 2004, showing that they have an interest in encouraging late payments. About 60 percent of U.S. credit card holders carry over their payments from month to month.

The worse the economy gets, the more appealing credit cards become. That's why the average credit card holder has four credit cards, each of which costs him or her money spent for, essentially, nothing.

Welch's bill would curb some of the worst abuses of the credit card industry. It would prevent arbitrary interest rate increases and excessive fees. It would require companies to give 45 days notice before changing interest rates and would allow consumers to cancel their cards. It would require an adequate period for payment of bills and protect consumers from due date gimmicks.

The credit card bill is just one step in the creation of a new New Deal for Americans, restoring fairness to the economy and halting the exploitation of working Americans by predatory institutions.