Angry Senators pass credit card reform

The credit card companies seem to have few friends on Capitol Hill these days, with even the most business-minded lawmakers siding with consumers in speaking out against steep rate hikes and fees.

The House was expected to pass, possibly as early as Wednesday, a bill that would enact sweeping new restrictions on the industry, including a requirement that customers penalized by higher interest rates because they missed a payment are given a chance to reclaim their lower rate after six months.

The Senate passed the bill Tuesday, 90-5.

"Card issuers raise rates for unclear reasons, use billing methods that consumers do not understand, and assign fees and charges without warning," said Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee.

President Barack Obama is expected to sign the bill into law. Treasury Secretary Timothy Geithner on Tuesday said the bill would "create a more fair, transparent and simple consumer credit market."

Of the five senators sympathetic to card lenders, two were from South Dakota, where thousands of jobs depend on the industry. Republican Sen. John Thune estimated the bill would cost as many as 5,000 jobs in his home state.

Sen. Tim Johnson, also from South Dakota and the only Democrat to oppose the bill, agreed it could be devastating.

"This is a time when millions of consumers are already facing lower credit limits and higher interest rates on their credit cards because of decreasing credit availability and continued economic instability," he said.

Also opposing the bill were GOP Sens. Lamar Alexander of Tennessee, Robert Bennett of Utah and Jon Kyl of Arizona.

But their voices were drowned out by lawmakers who said their offices had received dozens of complaints from voters.

"We said that big banks can no longer take advantage of hardworking Americans," Senate Majority Leader Harry Reid, D-Nev., said of the Senate vote.

The Pew Health Group estimates that 82 percent of cards available to consumers include the stipulation that the cardholder’s rate can increase to any amount indefinitely if the lender determines the person is too much of a credit risk. Consumer advocates say it is these types of practices that can bury consumers in debt if they make one mistake.

Under the new bill, a customer would have to be more than 60 days behind on a payment before seeing a rate increase on an existing balance. Even then, the lender would be required to restore the previous, lower rate after six months if the cardholder pays the minimum balance on time.

Consumers also would have to receive 45 days’ notice and an explanation before their interest rate was increased.

Some of these changes, including the 45-day notice requirement, are already on track to take effect in July 2010 under new rules being imposed by the Federal Reserve. But the legislation would put these changes into law and go further in restricting the types of bank fees and who could get a card.

For example, the Senate bill requires those under 21 who seek a credit card to prove first that they can repay the money or that a parent or guardian is willing to pay off their debt if they default.

7 Responses to "Angry Senators pass credit card reform"

  1. alaska  October 6, 2009 at 1:30 pm

    Are rewards credit cards worth it? The short answer to this question is that it depends, everybody is different in how they use their credit cards.

    http://www.yadinero.es

  2. matt7  May 20, 2009 at 9:09 am

    matt7 This comment is about the good news on Credit Card changes by our congress.WHAT ABOUT THE DOUBLE OR EVEN LARGER JUMP IN INTEREST RATES, ” WHEN THE ACCOUNTS HAVE NEVER (NEVER) BEEN LATE, MISSED OR TARDY ON ANY PMTS. THE ACCOUNTS WERE PAID BY BANK TRANSFER WITH IN 10 DAYS OF THE STATEMENT DATES”.
    (NOT DUE DATES)CAN SOMEONE ASK THE QUESTION ABOUT HOW WE GET CREDIT FOR THESE IMPUTED HIKES, DESCRIBED AS BUSINESS DECISIONS. THANKS MATT7

  3. AustinRanter  May 20, 2009 at 10:15 am

    Matt, Matt, Matt…

    This bill was an easy way for our loving, corrupt politicians to save face. This isn’t true reform. We all know what it is. It’s a scam.

    Anybody care to hit the “NOT AN INCUMBENT BUTTON” in the 2010 elections?

  4. woody188  May 21, 2009 at 1:45 am

    AustinRanter, AustinRanter, AustinRanter…

    Voting in 2010 for the non-incumbent will still get you more of the same. It’s a scam. All ballot choices are pre-approved, bought and paid for. Anyone that would dare cross the banks won’t even make it on the ballot.

  5. Elmo  May 20, 2009 at 1:38 pm

    If the Congressvarmints were serious about consumer protection they’d roll back those bankruptcy “reforms” that were enacted during the Bush II years. As you recall, they all rolled over and showed their bellies to the finance industry when the notion of allowing bankruptcy judges to restructure mortgage debt was on the table.

  6. Carl Nemo  August 21, 2009 at 11:08 pm

    Rest assured when these ‘angry’ Senatorial slime balls pass any so-called “public friendly” legislation that the fine print of the bill will surely put these scheming CC usurers in a better position than before to squeeze the unwashed masses dry…! : |

    Carl Nemo **==

  7. dummply  August 21, 2009 at 4:10 pm

    So even with the low scores, the late payments on the mortgage hurts you the most. The other thing that could hurt you also, is when you paid off your credit cards
    Bad Credit Credit Cards

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