Credit Cards

The credit card industry is less than 40 years old. It wasn't that long ago that the only way you could pay for your purchases was with cash or by cheque. It's small wonder that so many of us are no good at managing plastic money.

Credit cards are the modem equivalent of bills of exchange and letters of credit. Created in the U.S. in the 1920s, oil companies and hotel chains were the first to use plastic money. Next came the Diners Club card in 1950, then American Express in 1958. In 1959, the Bank of America introduced the BankAmericard. In the mid-1960s, the Bank of America began to license other U.S. banks to issue its BankAmericard. In 1977, the name Visa was adopted internationally.

As an association, Visa is jointly owned by its member financial institutions around the world. Visa itself does not offer cards or financial services directly to consumers and merchants. Each Visa member decides the terms, fees, and annual interest rate it will offer its customers.

MasterCard evolved from MasterCharge, which was introduced in 1967 by CitiBank of New York as the Everything Card. In 1981, MasterCard introduced the industry's first gold card program. In 1983, MasterCard was the first to use the laser hologram as an anti-fraud device. And in 1989, MasterCard introduced the first card with a tamper-resistant signature panel.

The success of credit cards attests to the influence marketers have over us mere mortal consumers. The cachet of "membership has its privileges," the sense of the exotic of "it's everywhere you want to be," and the feeling of potency of "master the moment" all encourage us to believe life would be far less satisfying and far more difficult without a credit card.

Crime and other problems caused by the credit card pushing by the banks led directly to passage of the Fair Credit Billing Act of 1974 and many other consumer protection laws, laws still around to protect you.

Until the seventies there wasn't much in the way of special credit card law because there weren't many credit cards around. Then abuse of card users by the card companies pushed Congress and the states to pass new consumer protection legislation. The federal laws, passed by Congress, cover the entire United States. The state laws, passed by various state legislatures, cover only things that happen in each individual state. If you live in California and have a problem with a California-based credit card company, both the federal and California laws would apply. Many state laws also apply to out-of-state card companies dealing with local residents. Sometimes the state laws are stronger than the federal law; sometimes they are not. It all depends on the state.

It's not possible to cover the laws of fifty states, so we concentrate on federal law. If you want to check out the laws of your individual state, your best bet is to go to your local county law library or a local law-school library.

Federal credit card laws on consumer protection have three levels:

• First are the laws actually passed by Congress. These are mostly found in Title 15 of the United States Code starting at section 1601 and include the Truth in Lending Act (the main credit card law) the Fair Debt Collection Practices Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, and so on. Sometimes they are called, all together, the Consumer Credit Protection Act.
• Second, Federal Reserve Board regulations that interpret the Truth in Lending and other laws about consumer credit. There are hundreds of pages of these Fed rules in what's called Regulation Z. The Fed also has an Official Staff Commentary on Regulation Z.
• Then on top of all these, there are hundreds of court decisions interpreting the Truth in Lending Act, Regulation Z, and the Staff Commentary.

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