New Dates Set for Credit Card Regulations
CREDIT CARD
New Bedford Standard-Times
Ayesha Aleem
Boston University Washington News Service
Nov. 4, 2009
WASHINGTON—The House voted Wednesday to advance the starting date for new credit card regulations by as many as eight months. The bill, like the one introduced by Rep. Carolyn Maloney, D-N.Y., and co-sponsored by Rep. Barney Frank and signed in May by President Obama, would limit the rate changes that credit card companies may impose on cardholders. The vote was 331-92.
Under the new terms, the regulation would come into effect on Dec. 1 instead of next Feb. 22 for some provisions and next August for others. Specifically, card companies would need to notify customers 45 days before any interest rate change, would not be able to raise rates based only on the customer’s history with other card companies and would have to apply minimum payments to balances with the highest interest rates.
It would also end “double-cycle” billing, by which the companies can charge interest on unpaid balances for debts incurred the previous month.
Supporters of the bill say that the card companies have not used the time constructively until the new law becomes effective and continue to charge exorbitant rates of interest and high fees.
Frank, the chairman of the House Financial Services Committee and an active champion of financial reform, said, “Banks took advantage of what we offered them.”
Maloney said, “The credit card companies have earned this [new] legislation because they have not used the time to modify their [computer] systems” to allow them to offer lower interest rates.
To critics who say the new legislation would increase consumer costs, Frank responded: “That is simply untrue. Banks will raise consumer costs as much as they can anyway. Some consumer costs should be raised. But nobody’s rates should be raised retroactively. Plus, you should be given notice.”
An amendment proposed by Rep. Jeb Hensarling, R-Texas, that would allow banks to offer lower interest rates without the 45-day notification period was adopted. Both Frank and Maloney supported this change.
The House also adopted an amendment by Rep. Betty Sutton, D-Ohio, to prohibit imposing a fee on people who pay down their balances every month. “The notion that people should be penalized for being prudent is crazy,” Sutton said.
In 2008, credit card companies imposed approximately $19 billion in penalty fees, with the amount expected to be more than $20.5 billion this year, according to a statement earlier in the year from Speaker Nancy Pelosi’s office.
“Consumers will receive important benefits,” Frank said of the date changes. When customers fully comply with credit card terms, companies should not be allowed to raise their interest rates, he said. “It is the single most unfair economic act I can think of that does not involve a pistol. This is not risk management, this is hostage-taking.”
###
