Albany, NY (06/1/05) - New York State Assembly passes legislation late yesterday that outlaws the use of universal default, a commonly used and relatively unknown practice by credit card companies that increases credit card rates based on a card holder’s unrelated financial activity.

According to Assemblyman Peter M. Rivera (D-Bronx), chair of the Assembly Puerto Rican/Hispanic Task Force, his legislation (Assembly Bill A.809) will, "Stop the current attack on consumers by credit card and banking corporations." The practice of raising interest rates on card holders for non-related financial activity, such as paying a utility or cable television bill late, is commonly referred to in the small print of credit card agreements as "Universal Default."

Rivera stated, "I look forward to working with my colleagues in the Senate to make sure that this legislation sends a clear message that this type of anti-consumer behavior will not be allowed in our State."

A national authority on this issue, Dr. Elizabeth Warren, Professor of Law at Harvard Law School, has assailed the behavior of credit card companies and notes that "Universal Default" is actually a breach of contract by card issuers that allows them to change the terms of their agreements with consumers at will.

"This legislation corrects an extremely unfair business practice of which many consumers are completely unaware. Credit companies should base fees and interest rates on a customer’s account with that company only. Penalizing consumers for late payments on unrelated accounts is unjustified and should be prohibited," said Assemblywoman Audrey I. Pheffer (D-Queens), chair of the Assembly Consumer Affairs and Protection Committee.

"It’s the only industry in the world to re-price something you already paid for," said Linda Sherry of Consumer Action, a nonprofit organization that conducts an annual survey on fees and rates. Sherry said universal default rates were as high as 29.99 percent in 2004 and have grown to as much as 35 percent this year.

"For too many unsuspecting consumers, the fine print of credit card agreements, mask hidden fees and late fees for a variety of reasons unknown to the card holder. The practice of ‘Universal Default’ is deceptive and unfair," said Assistant Assembly Speaker Rhoda S. Jacobs (D-Kings). "This legislation would put an end to this practice and ensure that consumers are not being taken advantage of by unscrupulous creditors. I applaud Assemblymember Rivera for his leadership on this issue and I urge the Senate to take-up this important consumer protection legislation."

"I am pleased that we are enacting this consumer protection measure that will save our working families from unfair charges on their credit care bills," explained Assemblywoman RoAnn M Destito (D-Rome), chair of the Assembly Government Operations Committee. "Senior citizens and other consumers will be best served by prohibiting unwarranted increases in interest rates in a universal manner."

Assemblywomen Aurelia Greene (D-Bronx), Assembly Assistant Majority Leader, stated, "I am proud to be a sponsor of this legislation, it is one of the best consumer related efforts that I have seen in a long time. The bill provides New York consumers the protection from card issuers arbitrarily increasing the fees based on non related issues. This legislation also protects out consumers from credit card schemes and should be a model for federal legislation."

According to Assemblyman Thomas Alfano (R-N. Valley Stream), ranking minority member of the Assembly Codes Committee, "this bill levels the playing field between the consumer and big corporations. Now, corporate greed can’t victimize a good customer."