It seems that the Senate's Credit CARD (Credit Card Accountability, Responsibility and Disclosure) Act may be on the way to President Obama's desk no later than the end of the week. Recently, Senator Chris Dodd, Senate Banking Committee Chairman, announced that a compromise has been made.
The Credit CARD Act of the Senate is part of the government's response to the growing public outcry over increasing credit card interest rates and other fees. Late last April, the House of Representatives approved the Credit Cardholders Bill of Rights as well. The Credit CARD Act has been in the Senate since early this month.
One major bump in the passage of the act was the debate between the Republicans and the Democrats over debtors who were burdened with huge interest rates because of tardiness over their credit card payments.
The Republicans wanted to grant credit card lenders the right to set interest rates according to a borrower's previous delinquent payment record. Democrats, on the other hand, were against this, stating that debtors who find themselves in similar situations would already be having a hard time paying their debts. An increase in their interest rates would only make it even harder for them to get themselves out of debt.
Although firmly supporting the ban on retroactive credit card rate increases, Senator Chris Dodd soon realized that the bill would not get Senate approval without the support of Republican senators. A compromise was reached between the two camps.
As the legislation now stands, credit card institutions retain the right to raise interest rates of delinquent consumers under the condition that they would lower the rates if the cardholder is able to meet the bills for six months. They are also prohibited from raising interest rates until the cardholder has been delinquent for at least 60 days. Credit card institutions also have to review the terms of the cardholder every six months. Finally, the Credit CARD act also adds Federal Reserve regulations, which require it to report credit cost and availability updates to the Congress every two years.
Along with the shaky economy and the unemployment problems of the U.S., the sudden rise in credit card interest rates has put a strain on every U.S. Citizen's finances. The Credit CARD Act will provide some relief for credit cardholders who have been struggling with making their monthly payments on time due to sudden interest rate hikes. Once the legislation gets out of Senate, it will go to President Barrack Obama for approval. The bill will be in effect nine months after the signature of the president has been placed on it.