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Press Release Thursday, August 24, 2000 |
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Consumers Union Urges Governor Davis to
Sign Bill Into Law
The California Senate today passed AB 1963
(Hertzberg), which requires credit card companies to disclose
information in their billing statements that will help consumers
better understand the costs of making the minimum payment on their
debt. The bill was sponsored by Consumers Union and supported by a
number of other consumer groups throughout the state. AB 1963 was
passed by the California Assembly in June.
"Disclosing this information will help
consumers better understand the reality of long-term credit card
debt," said Shelley Curran, Policy Analyst with the West Coast
Regional Office of Consumers Union. "We applaud the legislature for
supporting this important common sense consumer measure and urge the
Governor to sign it into law."
AB 1963 requires credit card companies to
disclose to consumers the total cost they will incur and the total
amount of time it will take to retire their debt if they make the
minimum monthly payment on their bill. For example, a consumer who
owed $2,500 on their credit card at 17 percent APR, would learn that
it would take thirty years and three months to pay off their bill for
a total cost of $7,773 if they made a monthly payment equal to 2
percent of their balance. A consumer who owed $5,000 would learn
that they would end up making payments totaling $16,304 over forty
years and two months if they made the minimum monthly payment.
"Credit card holders are often lulled into a
false sense of security by making the minimum payment on their
accounts," said Curran. "But by doing so, they end up paying far
more in interest than their actual debt. This disclosure requirement
will help consumers realize true the costs on long term credit card
borrowing and allow them make more informed financial decisions."
Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization, serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.
