Credit card companies will have no one to blame but themselves

If something like the Credit Card Holders' Bill of Rights that passed the House of Representatives last week makes it out of the Senate and onto President Barack Obama's desk, it will cost the banking industry more than $10 billion a year in interest payments, according to a study by the law firm Morrison & Foerster.

If it does, however, the credit card industry will have no one to blame but itself.

Yes, credit cards comprise what is known as an unsecured loan, debt that isn't backed by any asset other than the borrower's credit history.

As such, the loans are risky for the banks to make -- who knows when you might lose your job or decide to charge each of your cards up to the credit limit? -- and lenders deserve a higher rate of return.

But some of those interest rates and lending terms would make the Mob blush.

One newspaper staffer who overlooked a credit card balance of less than $3 found himself facing a $35 late fee. Other credit cards holders who have missed paying a gas bill, for example, have seen credit card companies -- with no connection to the gas bill -- jack up the interest rates to 33 percent. That's called universal default.

Customers have been subjected to double-cycle billing, in which consumers who normally pay off the full balance lose the interest-free period simply for deciding to carry a balance.

College students just learning the handle their own finances have seen their debt blossom at the same time they hope to begin paying off college loans.

Some credit card companies also impose interest rate hikes at the end of a billing cycle, yet apply it to the outstanding balance -- called a retroactive rate hike, a practice that also would be banned under the Credit Card Holders' Bill of Rights.

We know of no other contract that could be unilaterally changed in midstream by the lender -- at least by someone without organized crime connections.

How much of a problem is credit card debt?

According to CreditCard.com, an online market, the average outstanding credit card debt for households that have at least one card was $10,679 at the end of 2008.

That's up 25 percent in the last 10 years, for a total of $963 billion in January. (A large number, yes, but tiny compared to the red ink being rolled up by the federal government.)

The new legislation should bring some of the sanity back to the credit card industry that was lost when state usuary laws were effectively canceled by federal legislation in 1980.

At the same time, surely the abuses of the current credit card industry leave an opening for lenders willing to be honest with borrowers with unsecured loans while still making a reasonable profit.