Congresswoman circulates far-reaching credit card bill

Congressional heat on the credit card industry just got turned up a notch. Rep. Carolyn Maloney, chairwoman of the House Financial Services Committee's financial institutions and consumer credit subcommittee, is floating a bill that would abolish many of the card issuers' practices that consumers find most offensive.

The bill would abolish universal default, the practice that allows issuers to raise consumers' rates if they're late on any payment to anyone, or if their credit score falls for any reason. It would also boost the minimum notice period that issuers have to give consumers that a card policy has changed. It's currently 15 days; the bill would increase it to 45.

In addition, it would ban double-cycle billing, which allows card issuers to calculate interest over two billing periods, which lets them add an interest charge even if a balance was paid off a month ago.

A spokeswoman for the New York Democrat confirmed today that the draft was being shown to issuers and consumer groups and likely would be introduced in 2008, along with a round of hearings on the topic. A copy of the draft is available in this morning's online edition of American Banker (subscription required).

Maloney had issued a series of "gold standards" for the industry in August, and at the time said that she hoped the standards would spur the industry to regulate itself. A Senate committee also held a high-profile hearing on the card industry in the fall. A few card issuers dropped a few of the policies targeted by lawmakers; most didn't, defending them as sound business practices that match price with risk.