by Congressman Dennis Kucinich
Washington, Oct 30, 2009
Congressman Dennis Kucinich (D-OH) sent a letter Comptroller of the Currency, Mr. John Dugan, requesting an investigation of the effect on consumer credit scores of some bank practices in advance of the enactment of the Credit Card Accountability Responsibility and Disclosure Act.
Consumer credit scores, originally developed to measure a consumer’s creditworthiness, have become much more influential in a consumer’s life. Credit scores are now used in writing insurance policies and even in determining employability. Kucinich is concerned that some practices, such as charging “inactivity fees” for unused credit, have the potential to damage consumer credit scores.
“Consumers who have worked hard to maintain a healthy credit score will be faced with an unfair choice: they can either pay a new annual fee to maintain available credit levels and the healthy credit score that comes along with it, or cancel unused cards, lose their creditworthiness, and pay higher interest rates on loans,” writes Kucinich in the letter.
“It is simply outrageous that at a time when the American people are being encouraged to increase their savings and spend more responsibly, some credit card companies are preparing to punish their customers for doing precisely that.”
The full text of the letter follows:
October 29, 2009
The Honorable John C. Dugan
Comptroller of the Currency
United States Department of the Treasury
250 E Street SW
Washington, D.C. 20219-0001
Dear Comptroller Dugan:
I write to you with deep concern regarding deceptive practices of credit card issuers and I appeal to you to exercise your authority to protect credit card consumers.
When Congress passed the Credit Card Accountability Responsibility and Disclosure Act, I was concerned that credit card issuers would see the enactment date of the law as a deadline by which to implement consumer-unfriendly provisions. My suspicions have been confirmed by recent news reports outlining certain practices that some credit card issuers have instituted to collect fees in advance of the law’s effective date.
One such nefarious invention is an “inactivity fee,” which reportedly some credit card issuers are assessing, on credit card holders who are not using their credit card. Imagine, a fee on consumers who don’t overspend on their credit cards. It is simply outrageous that at a time when the American people are being encouraged to increase their savings and spend more responsibly, some credit card companies are preparing to punish their customers for doing precisely that.
Consumers who elect not to pay the inactivity fee will not be able to avoid punishment either. As a consequence of not paying the inactivity fee, consumers will forfeit their inactive credit card. They will then have less available credit, relative to actual debt. The credit scoring industry monitors the relationship between these amounts, which is known as the “credit utilization ratio.” The credit utilization ratio is an important element in a consumer’s credit score, and the higher the credit utilization ratio, the lower the credit score. A lower credit score can have far-reaching unrelated effects, such as eligibility for employment or life insurance.
Thus, consumers who have worked hard to maintain a healthy credit score will be faced with an unfair choice: they can either pay a new annual fee to maintain available credit levels and the healthy credit score that comes along with it, or cancel unused cards, lose their creditworthiness, and pay higher interest rates on loans.
As the regulator for national banks, the Office of the Comptroller of the Currency (OCC) has the authority and the obligation to protect bank customers from unfair and abusive practices. The practice of charging credit card holders an inactivity fee for unused credit warrants your attention and further investigation. I am therefore asking that you immediately review this practice and investigate its potential effect on consumer credit scores.
Thank you for your attention to this matter. I look forward to your timely response.
Dennis J. Kucinich
Member of Congress