Credit Cards » Credit Card News » The Credit Cardholder’s Bill of Rights Goes To the Senate
Date May 7, 2009

The Credit Cardholder’s Bill of Rights Goes To the Senate

Later this week or earlier the next, the United States Senate will begin discussion over the controversial credit card legislation House bill sponsored by Rep. Carolyn Maloney.

964707_11065025The bill aims to limit fees and rate hikes of credit cards in an effort to protect debt laden consumers. The bill was first pushed and approved in the House of Representatives at the end of last month. Support for the bill in the House of Representatives was impressive, passing with a vote of 357 to 70. Furthermore, the bill also seems to have the support of President Obama who expects to sign the bill into law by the end of May.

After passing through the House of Representatives, the bill is now in the Senate where it will be further deliberated and additional measures and changes in the details of the bill are expected to be made.

Old timers in Capitol Hill say that the Senate will probably pass a bill similar to what the House passed last week. However, many details still remain up for debate and the final form of the bill to be passed by the Senate will most probably depend on a few Senators who are pushing for a compromise between proposals of the bill and what they perceive to be the needs of the credit and banking industry.

Once the bill is signed, it is expected to pass into law several guidelines newly passed by the Federal Reserve which ensures that repayment balances of debtors are credited proportionally. This will hopefully give consumers the chance to whittle down their accrued debts at the highest interest rates.

The bill being made by the Senate has been described as being tougher than the bill that the House recently passed. However, some Republicans are voicing the concerns of the banking industry that too strict legislation may lead to a shortage of available credit cards, with those having poor credit history being hardest hit.

Peter Garuccio from the American Bankers Association had this to say: “Our concern is that as policymakers move forward, that they strive to find the right balance between enhancing consumer protection and ensuring that credit cards remain available.”

One of the most active Senators working for a compromise is Chris Dodd, the Chairman of the Senate Banking Committee. He is currently working on an effective compromise with Senator Richard Shelby, the Banking Committee’s top Republican representative. It is expected that Dodd’s bill would present some major changes to what the House passed earlier.

The Credit Card Holder’s Bill of Rights is certainly a hot topic in financial circles nowadays and the final form of the bill will depend greatly on the type of compromise that the Senate will settle on. When the final form of the bill is passed, it might just be the salvation that Americans swamped in debt are looking for.

Date April 30, 2009

Credit Card Bill Passed By U.S. House Of Representatives

Consumers angry and frustrated by the tactics recently employed by credit card issuers can find some comfort knowing relief is on the way. Today the House voted 357 to 70 in support of the Credit Cardholders’ Bill of Rights. Lawmakers are in favor of legislation which protects credit card users from sudden hikes in interest rates, hidden fees and unfair billing practices.house-of-representatives

The House adopted a series of amendments before passing the bill. One amendment would require credit card issuers to warn card holders who are close to exceeding their credit limits while another requires maintaining low introductory rates for at least six months. Incorporating Federal Reserve regulations which take effect in 2010 the House went a step further by adding restrictions for credit cards for students.

President Obama backs efforts to make changes in an industry that has recently increased what some people consider abusive, manipulative and unethical billing practices. Supporters hope to have legislation signed into law by late May after the Senate considers its own version next week. If signed into law legislation would be implemented within 90 days.

Banks who are already reeling from the mortgage crisis and the rising level of defaults have objected to legislation regulating the industry claiming it will only result in higher interest rates for all consumers and fewer chances of obtaining credit.

Some of the issues covered by the Credit Cardholders’ Bill of Rights include:

  • Requires credit card companies to give 45 days notice of intended increases in interest rates. This give the consumer the opportunity to either pay off the balance or look for other opportunities for financing.
  • Protects responsible cardholders who pay on time from being penalized unfairly.
  • Prevents card companies from increasing rates unfairly on existing balances.
  • Allows cardholders to set limits on their credit card accounts.
  • Requires credit card companies to allocate payments to higher interest balances or distribute the payment evenly to balances with different interest rates. Presently credit card companies apply payments toward low interest balances allowing higher interest balance to continue to grow.
  • Stops double cycle billing where card companies charge interest on debt consumers have paid on time.
  • Prohibits imposing excessive fees to cardholders.
Date April 28, 2009

Credit Card Companies Cry Unfair

President Obama has advised credit card companies that as President, he would be supporting stricter regulations on the credit card industry and its practices. Coming up in July 2010, tougher regulations on deceptive practices by credit card companies will go into effect. Consumer felt some relief but the credit card executives began to whine.

While many credit card companies are hard at work, raising customer’s interest rates at the drop of a hat or cutting credit from loyal, good-credit customers, the executives still feel as though they have been through enough already with the Federal government. They feel they have already had to work overtime to comply with the new set of rules, even if they don’t start until mid-next year. They also complained because so many customers are defaulting on their contracted financial obligations because consumers are facing job loss and the inability to survive from paycheck to paycheck. They reason that by raising interest rates of the “good” customers, they can make up for the loss from the credit_card2amount of defaults. These executives conclude that what they are doing will help to keep them in business.

Luckily, President Obama wasn’t in agreement. Instead, Obama reasoned that there needed to be more consumer protection while still enabling the credit card companies to make a profit. The new rules will certainly benefit credit card holders for many reasons. One of the major changes will dictate that the credit card companies can no longer raise the interest rates on any existing balances. Late fees can also not be charged unless a reasonable time has passed before a credit card holder hasn’t made a payment. It is these practices that are now taking place that are leaving more consumers struggling with credit card debt.

Essentially, the government wants to help rehab the relationship between the consumer and the credit card issuers. There will be the need for clearer agreements the average consumer can understand in an effort to prevent unknowing applicants get taken advantage of by big business. The President wants the situation to be fairer for all involved and the new regulations for 2010 should be a good start.