House Votes for Credit Reform Now, but Senate Prospects Dim

Thumb.BankFlagThe House voted 331-92 today to immediately begin the enforcement of tough new credit card legislation that is scheduled to take full effect in February, but the measure’s prospects in the Senate are dim.
Several lawmakers are worried that a quicker start-date would hurt the industry and limit the availability of credit while the economy is still mired in high unemployment and overall malaise.
The original House measure, sponsored by Carolyn Maloney (D-N.Y.) and House Financial Services Chairman Barney Frank (D-Mass.), sought to push up the enactment date to Dec. 1
But the House approved an amendment by Rep. Dan Maffei (D-N.Y.) to enforce the new rules immediately.
Under the new proposal, if lenders agree to temporarily freeze interest rates and fees, they would have until February to comply with a requirement to apply excess payments on a card to a user’s highest interest rate. The proposed provision came days after Senate Banking Committee Chairman Chris Dodd had proposed an immediate freeze on interest rates and fees on existing balances until February.
“The same companies that were in my office that claimed they needed months at least to make changes to their systems, apparently only needed in some cases days to find ways to raise interest rates and decrease credit limits on customers across the country,” said Dan Maffei.
Legislators have considered pushing up the reform’s start date in the wake of card company actions, including the raising of interest rates, the lowering of credit limits and the cancellation of under-used accounts, even for card users with good credit. Banks have denied that they are hiking rates because of the pending February deadline. The card issuers attribute fee increases on economic conditions and higher default rates that have resulted in higher costs.
The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 was signed into law by President Obama in May, and will mark a turning point for American credit card consumers and the banks and companies that issue those cards.
The laws will restrict when and how card issuers can raise rates, impose fees and modify cardholder policies. To consumers seeing their rates inexplicably shoot up, the legislation’s most welcome provision will ban “unfair” rate hikes on existing balances. The law, however, will not affect card rate increases currently take place among many of the larger card issuers.
See Related Article:
U.S. Seeks to End “Unfair” Practices with Reform Laws
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