Ellison Reintroduces Universal Default Prohibition Act

Press Release

Ellison Reintroduces Universal Default Prohibition Act

Congressman Keith Ellison (D-Minneapolis) reintroduced important legislation to curb a harmful practice employed by credit card companies called universal default.

Under universal default provisions, credit card companies can raise the rate on a credit card to the default rate based on a late payment on another credit card, loan or mortgage. Consequently, other credit card companies can raise their interest rates on a card holder even if he or she has never made a late payment on their particular credit card.

"For years now, we have heard endless stories of the harmful and deceptive practices of some credit card companies," Ellison said. "These practices include exorbitant interest rates, and hidden fees. One of the worst practices is universal default. Under this procedure, if you're late or miss a payment on one card, you're counted as late on all of them. That is highly predatory and needs to end," Ellison stated.

Although some private lenders have already voluntarily ended this practice, Congressional action is necessary in order to level the playing field for all credit card companies and prevent the return of the practice.

In the 110th Congress, this bill was incorporated into the Credit Cardholders' Bill of Rights Act of 2008 (H.R. 5244), which overwhelmingly passed the House 312-112.

"We hope to have it included in the comprehensive credit card reform package that the Financial Services Committee will mark up in the coming weeks," the 5th District Congressman stated. "The Universal Default Prohibition Act of 2009 (H.R. 1637) is an important piece of the economic fairness puzzle and one of many reforms I intend to introduce in a much broader push toward consumer justice," Ellison concluded.

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