New York Governor George Pataki vetoed a bill that aimed to protect consumers from having their credit card interest rates increased under so-called universal default — which allows card issuers to boost APRs for failure to pay an unrelated bill on time.
A measure that would have protected credit cardholders from interest rate hikes levied because they were late on other bills was vetoed in August of this year, by New York Gov. George Pataki. So-called universal default allows credit card issuers to increase APRs when customers are negligent in paying debts other than on that issuer’s credit card, such as for late payments on another card, a mortgage, utility or car payment, or for going over the limit on any credit card.Advocates said the bill which Pataki shot down would have been the first in the U.S. to prohibit credit card companies from raising interest rates simply because a consumer failed to pay an unrelated bill on time. A credit card issuer who violated the law would face a misdemeanor charge and up one year in jail.
Governor Pataki commended the effort to protect cardholders, but said that the bill has fatal flaws. He argued that it was written too vaguely while carrying a severe penalty for a practice that has been legal for years,
According to Russ Haven of the New York Public Interest Group, which supported the bill, the average family has $9,000 in credit card debt. He noted that one of the most shocking portions of credit card agreements is the universal default provision, adding that New York could have staked out important ground in protecting consumers with the bill.