Senate Bill S47

                                 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.