State Senator Charles Fuschillo announced that the Senate today approved legislation that he sponsors that would ban the practice of "universal default" in New York State. Universal default allows credit card companies to increase interest rates if a cardholder makes a late payment to another credit card company or even pays a phone or utility bill late.
Nearly half of U.S. banks use universal default, enabling them to legally raise credit cardholders’ interest rates as high as 40 percent. Senator Fuschillo’s legislation (S. 2969-A) would prohibit credit card companies that do business in New York from enforcing universal default provisions against New York cardholders.
Senator Fuschillo (R-Merrick), Chairman of the Senate Committee on Consumer Protection, said, "Today, the State Senate voted in favor of protecting New Yorker consumers from this unscrupulous credit card practice. Under universal default, if you miss a payment to one credit card, your interest rates on all your other cards can soar. That practice is simply unfair to consumers and has helped to drive up credit card debt for New Yorkers. This measure will help to move the credit card industry in a more consumer-friendly direction."
There are approximately 30 million credit cards issued to New York residents, with the average consumer holding more than four cards in their wallets. Statistics show that the average U.S. household carries about $9,300 worth of credit card debt.
Senior citizens and college students, two groups that have been identified as relying more on credit cards in recent years, are impacted greatly by universal default and other credit card practices. According to a study by the National Consumer Law Center, the average credit card debt for consumers aged 65 to 69 has skyrocketed 217 percent over the last decade to $5,844. Forty-seven percent of college students have four or more credits cards, and students double their average credit card debt and triple the number of credit cards in their wallet by the time they graduate college (Nellie Mae Credit Card Study).
Senator Fuschillo’s legislation is sponsored in the State Assembly by Assemblyman Peter M. Rivera (D-Bronx).
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