House Democrats offer credit card rights bill

By John Poirier

WASHINGTON (Reuters) - Credit card holders would get earlier notice of interest rate changes and not be charged fees on debt already paid off under legislation introduced by several U.S. House of Representative Democrats on Thursday.

The legislation, dubbed the "Credit Cardholders' Bill of Rights," comes amid growing frustration among consumers complaining about unexpected fees and rising interest rates.

"A credit card agreement is supposed to be a contract, but in recent years cardholders have lost the ability to say no to unfair interest rate hikes and fees," said U.S. Rep. Carolyn Maloney.

The New York Democrat said the bill is balanced between consumers and companies but bans "major industry abuses."

The legislation does not set a cap on interest rates, limit fees or impose price controls.

But it would notify consumers 45 days ahead of changes to the terms of the account, instead of the current 15-day minimum -- a provision that could reduce companies' revenues.

Credit card issuers warn that restrictions on their business could increase their costs and further tighten credit at a time of economic weakness.

"We are concerned that the changes outlined in this legislation would unintentionally force higher costs and reduce access to the very people it intends to help," the American Bankers Association trade group said in a statement.

Last year, the Federal Reserve proposed changes to disclosure rules spanning new business solicitations to monthly statements in an effort to help consumers better understand fees and rates.

In the Senate, the chairman of the Permanent Subcommittee on Investigations, Carl Levin of Michigan, along with other Democrats, has offered similar legislation.

Levin has been highly critical of a practice called "double billing" when a consumer is charged higher payments on a balance already paid.

Another practice widely criticized is "universal default," which results in higher interest rates when a card holder's credit rating drops because of default on bills not linked to the card.

Among the biggest issuers of Visa and MasterCard Inc credit cards are Bank of America, JPMorgan Chase, Citigroup, Capital One Financial and Discover Financial Services. American Express also issues cards.

(Reporting by John Poirier; Editing by Tim Dobbyn)