Washington – The Senate overwhelmingly passed a bill that would sharply curtail credit card issuers’ ability to raise interest rates and charge fees, taking a critical step in reforming an industry that has gone largely unregulated for decades.
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In a 90-5 vote, The Senate delivered a victory to consumer groups and to the White House, who blame industry practices for sending Americans deeper into debt just as they are losing their jobs and their homes.
Lawmakers will now turn to reconciling differences with a similar bill passed by the House on April 30. President Obama has said he wants to sign a bill into law by Memorial Day.
Consumer advocates said the Senate’s action showed a solid commitment to consumer protection.
“This is landmark legislation that is going to make the credit card marketplace more transparent and more fair for millions of consumers,” said Travis B. Plunkett, legislative director for the Consumer Federation of American.
“In particular, it’s going to prevent credit card companies from suddenly and unjustly increasing interest rates which is pushing many consumers with credit card debt into bankruptcy.”
Congress stepped up efforts to pass legislation in recent weeks, as several card companies increased interest rates and cut limits on both delinquent and credit-worthy customers. Outraged consumers complained that they were being mistreated by the same companies that were receiving federal bailout money. The Obama administration listened and stepped into the fray, meeting with credit card executives at the White House and stipulating provisions they wanted to see in legislation.
Industry representatives have argued that any legislation would result in more lost revenue and force them to raise interest rates and withhold credit.
“Credit cards are a strong economic driver and are relied upon by consumers and small businesses to make payments and to bridge short-term financial gaps,” said Edward L. Yingling, president and chief executive of the American Bankers Association. “The goal in the legislation should be to obtain the right balance: providing protections, while maintaining the important role of credit cards in providing loans to consumers and small businesses. Unfortunately, we believe the bill does not achieve that balance and will therefore cause an unnecessary decrease in credit availability.”
Analysts and lawmakers said the chances of a swift compromise were high because the issue has such populist appeal. Even Republicans who had vehemently opposed reform made critical concessions. The House will now either approve the Senate bill or the legislators will have to agree on a version to send to Obama.
The Senate bill allows rate hikes only if the borrowers’ payment was past due 60 days. Card companies would have to restore the original rate if the customer paid on time for the next six months.
The House bill, authored by Rep. Carolyn B. Maloney (D-N.Y.), largely mirrors regulations passed by the Federal Reserve in December that also would ban so-called “unfair and deceptive” practices. It is not considered as strong as the Senate bill.
The Federal Reserve’s new rules do not go into effect until July 2010. Both the House and Senate bills seek to accelerate that timeline. The Senate bill would be enacted nine months after signing and the House bill 12 months after.
They deserve credit for that!
To implement this bill either by July 2010 or 9 months from now defeats the whole purpose this new law is trying to accomplish. Either make this the law of the land asap or expect many more consumers around the country to file for bankruptcy by then.
its about time, all 4 of my credit cards, has had their APR raised from 7-11% up to 22-25%, and i have never missed a pmt in over 6 years with these cards
The problem is that now, credit card companies will make it much harder to get credit and will lower the credit limits on existing cards. Now is not the best time to tighten the credit market. Yeah, some of the card companies have exhorbitant interest and penalties, but beware of unintended consequences.
I normally don’t agree with government intervention on any leve, but this is one of the few times where I agree that the government had to step in. Once we bailed the banks out of bankruptcy, they were going to have to raise their rates in order to make money again. Communism begets Communism. You can’t regulate and finance part of it and not all of it. The regulated parts will become barely profitable and they will therefore make up for it by making money on the unregulated parts of the financial business.
If only the government had kept its nose out altogether, our economy would have reached a near collapse, and new intelligent businesses would have been born that were beholden only to the free market, as it should be. No need for socialism or communism in America any longer.
The credit card industry is nothing less then legalized loan sharking. They are the legalized version of what the Mafia once was, but with a safety net called “bankruptcy”. They maintain their offices in three states that have no usury laws at all. First they sent everyone hundreds of offers “to please take that vacation which you couldn’t afford”. They sent us checks and begged us to “please cash it”. Then they changed the rules in mid stream with the Rishesdiga “universal default” rule, and lobbied very hard in Washington to tighten the conditions for bankruptcy, which they succeeded.
I know many people who are deep into credit card debt, and are over their head. Some can’t even go bankrupt because they lied when applying for credit. IMO it would be a blessing if credit cards went out of existence and we’ll use “plastic” debit cards instead. To everyone who is suffering from credit card debt, take my advice, that if you can, you should do yourself and your family a favor and go bankrupt. You are NOT a Ganef for going bankrupt. It is the banking industry which are the Ganovim and Roidfim. Your first obligation is to your family and sanity.
Thank you #10 and #11 for your advice. You are probably more up to date then me on how to deal with getting rid of credit card debt. My advice was meant for those who are drowning (literally) in debt and for those who don’t have any assets to lose. First someone should talk to an expert before taking the option of bankruptcy. Advice should come from someone who is recommended by a friend, not by most advertised advice givers. They may be in cahoots with the credit card companies plus they might cost you some more money.