[StBernard] House Votes to Speed Up Credit Card Reforms

[Westley Annis]

November 4, 2009                                                    

 

 

House Votes to Speed Up Credit Card Reforms

Maloney-Frank bill will implement credit card reforms immediately upon
enactment

 

 

Washington, DC - The House of Representatives today overwhelmingly approved
legislation sponsored by Reps. Carolyn Maloney (D-NY) and Barney Frank
(D-MA) that would push up the effective date of credit card reforms
scheduled for next year to immediately upon the signing of the bill.
Originally passed by Congress and signed into law by the President last
spring, the Credit CARD Act had three staged implementation dates: August
2009, February, 2010, and August, 2010.  H.R. 3639 moves up the remaining
dates by which banks and credit card issuers would have to comply and
applies to the largest card issuers that control over 80% of the credit card
market.  The bill passed by a vote of 331-92.

 

Rep. Carolyn Maloney said, "Card companies have redoubled many of the
abusive practices that brought Congress to pass my original reforms last
Spring. Rather than use the time-- time they asked for-- since the bill's
signing in May to prepare for the changes, they've raised rates and fees
with absolutely no regard for the dire position of millions of their
customers. 

 

"I believe the card issuers have heard the message loud and clear today:
their practices can no longer be tolerated. These reforms are crucial
changes which level the playing field between card issuers and card holders.
The reforms force the credit card market to actually function as markets
should: by open competition among card offerings, with clear disclosure of
interest rates, fees and other features. It bans rate hikes on existing
balances, deceptive due-date gimmicks, and requires consumer opt-in to
over-limit fees-and allows consumers enough time to switch cards if other
terms and conditions change," Maloney said. 

 

"Consumers, especially in this economy, cannot wait any longer for these
protections. I am extremely pleased that this legislation passed today,"
said House Financial Services Committee member Rep. Dan Maffei (D-NY), who
successfully offered an amendment today that will move the effective date of
the bill to the date of enactment.

 

The House also approved an amendment, offered by Carolyn McCarthy (D-NY) and
Betsy Markey (D-CO), permitting card issuers that adopt a moratorium on
interest rate increases on current balances and new balances incurred before
Feb. 22 to be exempt from the earlier effective date for a provision that
requires an issuer to apply customer payments to the highest rate balance.
Today's bill also would exempt small credit card issuers that frequently
outsource computer programming functions, and gift card providers, due to
the fact that gift cards have already been printed and shipped for the 2009
holiday season. Both would have to comply with the later deadlines
previously laid out in the Credit CARD Act. 

 

The bill now goes to the Senate, where Sen. Mark Udall (D-CO) has introduced
companion legislation (S. 1833) and Sen. Christopher Dodd (D-CT), Chair of
the Senate Banking Committee, has introduced an immediate moratorium on
retroactive rate increases (S. 1927).

 

The provisions which will take effect immediately upon enactment include:

 

*        Prohibits arbitrary interest rate increases and universal default
on existing balances; 

*        Prohibits issuers from charging over-limit fees unless the
cardholder elects to allow the issuer to complete over-limit transactions,
and also limits over-limit fees on electing cardholders;

*        Requires payments in excess of the minimum to be applied first to
the credit card balance with the highest rate of interest;

*        Prohibits issuers from setting early morning deadlines for credit
card payments;

*        Prohibits interest charges on debt paid on time (double-cycle
billing ban);

*        Requires issuers extending credit to young consumers under the age
of 21 to obtain an application that contains: the signature of a parent,
guardian, or other individual 21 years or older who will take responsibility
for the debt; or proof that the applicant has an independent means of
repaying any credit extended;

*        Requires penalty fees to be reasonable and proportional to the
omission or violation.

*        Requires that creditors periodically review all interest rate
increases since January 2009 and reduce rates when a review indicates that a
reduction is warranted.

 

These provisions already took effect last August 20th:

 

*        Provide increased written notice to consumers of any increases in
the interest rate or otherwise makes a significant change to the terms of a
credit card account; 

*        Inform consumers of their right to cancel the card before the rate
hike goes into effect;

*        Send statements to consumers 21 days before the due date of any
payments. 

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