Credit card trouble

Our view: Abusive practices of credit card companies add to debt burden of families

reforms should be a priority for the next Congress

Americans aren't just struggling to pay their mortgages these days. Many families have accumulated staggering amounts of credit card debt in recent years, and growing numbers are falling short in their efforts to repay. Consumers have accumulated $900 billion in credit card debt, an average of $9,000 for every family with more than one card. The average interest rate on that debt is 14 percent, and the credit default rate is mounting, up 48 percent from a year ago, according to Moody's Investors Service.

Many consumers share blame for irresponsible use of their credit cards, but federal regulators have concluded that card companies have lending practices that can unfairly trap American families in debt. The quickest way to help consumers is for the Senate to pass a House-approved package of reforms if Congress meets later this month.

Like some mortgage lenders, credit card companies have promised easy credit to borrowers that too often turns into onerous interest debt. A temptingly low introductory rate on a credit card can climb to 30 percent or more after a single late payment or if consumers fall behind on payments to other card companies or lenders.

The proposed reforms would prohibit credit card companies from raising interest rates on money already borrowed, except under limited circumstances, and prevent card companies from charging a late fee if the bill was mailed less than 21 days before the due date. In 2005, the six largest credit card issuers collected $7.4 billion in penalty fees alone, according to a 2006 report by the Government Accountability Office.

Congress also is considering legislation that would restrict the amount of credit and the number of cards available to college students, who are likely to be unsophisticated about personal finance.

Credit card companies claim that the proposed reforms would reduce the availability of credit and drive up costs for all consumers. But the way many card companies operate, it's often impossible to determine the real costs of borrowing and many customers fall further and further behind. It's time to end these abusive practices.