April 1, 2009
The U.S. Senate will vote on the Credit Card Accountability, Responsibility and Disclosure Act, a measure designed to end some of the credit card industrys more abusive practices.
The measure made it out of the Senate Banking Committee on a razor thin 12-11 vote.
The bill would:
• Protect consumers from "any time, any reason" interest rate increases and account changes;
• Prohibit unfair application of card payments;
• Protect cardholders who pay on time;
• Limit fees and penalties;
• Ensure that cardholders are informed of the terms of their account; and
• Protect young consumers from credit card solicitations.
Many of these same provisions were approved by government regulators late last year. However, backers of the legislation point out they dont take effect until mid 2010. In the meantime, they say, credit card companies are free to continue their present practices.
Tamara Draut, Vice President for Policy and Programs at Demos, a non-partisan policy center, says legislative action is all the more necessary because of the deepening recession.
In this tough time, it is unthinkable that credit card issuers would think of tightening their grip on the household pocketbook, but that's exactly what many have done in recent months -- capriciously raising fees and penalties, even as the government poured billions of dollars into them, she said.
But the American Bankers Association said it was disappointed by the Senate Banking Committee vote, and that passage of the bill would hurt consumers as much as it would banks.
"Credit cards provide access to credit for millions of Americans and small businesses every day. Making this credit available is a very risky business and the Committee's action today will unfortunately make it harder - not easier - for banks to continue doing so, said Kenneth J. Clayton, ABAs senior vice president, card policy. Credit card lenders of all sizes will likely have to pull back on providing reasonably-priced credit to a wide range of consumers and small businesses. It is hard to see how that makes good policy sense.
Sen. Chris Dodd (D-CT), sponsor of the bill, said the close committee vote indicated the bill may need modification to ensure passage by the full Senate. Similar legislation is currently making its way through the House of Representatives.
