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Senate Overwhelmingly Approves Credit Card Reform

Bill passes Senate 90-5; Obama wants complete legislation by weekend

By Mark Huffman
ConsumerAffairs.com

May 19, 2009

• Credit Tips And Tricks • Get Control of What You Owe • No Easy Way Out Of Credit Card Debt • Penalty Fees, Interest Rate Hikes, and Misleading Contracts Await Credit Card Shoppers • "Convenience Checks" Carry a Heavy Price Tag • New Forms of Credit Scoring • Understanding Credit • Credit Bureaus: Who You're Dealing With • Reading Your Credit Report • Credit Scoring: The Fickleness of FICO • Credit Knowledge: A Long, Hard, Struggle --- News • Retailers Applaud GAO Report On Interchange Fees • Schumer Moves to Clean Up Credit Reporting Ads • Report: Deceptive Credit Card Practices Remain Widespread • Dodd Bill Would Freeze Credit Card Rates • Annual Credit Card Fee Makes a Comeback • Credit Card Holders Angrily Abandon Their Cards • Fed Proposes New Credit Card Rules • Lawmakers Propose Faster Adoption Of New Credit Card Rules • Acid Test: Prepaid Debit Card vs. Big Bank • J.D. Power: Customer Satisfaction With Credit Cards Falls • How To Survive The New Credit Card Rules • New Credit Card Law Not A Cure-All • Consumer Credit Continues To Shrink • Consumers Using Credit Cards To Stay Afloat, Survey Finds • Credit Cards Giving Consumers Heartburn • Obama Signs Credit Card Bill • Olive Garden Settles Credit Card Data Exposure Suit • Video — Credit Card Law May Produce Unintended Consequences --- • More about credit cards

With President Obama's strong urging and a bi-partisan compromise, the U.S. Senate has approved the Credit Card Accountability, Responsibility and Disclosure Act, protecting consumers from excessive interest rates and fees.

The measure passed by an overwhelming 90-5 margin.

The House has already passed similar legislation, the Credit Cardholders' Bill of Rights. President Obama has said he wants to sign legislation by this weekend.

There are differences between the House and Senate versions that must be worked out in conference, but House and Senate leaders express confidence that can be done. Both versions prohibit banks from raising interest rates on existing balances. In most cases they would both prevent unannounced rate hikes, while making credit card agreements simpler and more transparent.

The Center for Responsible Lending estimates the average household debt by credit cardholders who carry a balance is around $17,000.

"While even consumers who usually pay off their cards monthly are hit by unfair rate hikes and lowered credit limits, industry employs predatory tactics aimed at 'revolvers,'" the organization said in a statement. "We are pleased members of the Senate have examined many questionable industry practices — terms and conditions of credit card contracts, unjustified fees and interest rates, and aggressive marketing practices — and urge them to rein in abuses to head off an even greater economic crisis."

Bankers say passing the sweeping reforms will have the result of reducing access to credit for many consumers. Edward L. Yingling, president and CEO, American Bankers Association, says many of the reforms in the legislation will be accomplished through regulation.

"Sweeping new rules adopted in December by the Federal Reserve significantly enhance consumer protection for credit card users by vastly improving transparency in card agreements and prohibiting various practices considered problematic for cardholders," Yingling said last month after the House passed its version of the legislation. “The ABA strongly believes that any additional legislative efforts should strive to achieve the right balance between enhancing consumer protection and ensuring that credit remains available to consumers and small businesses at a reasonable cost.

President Obama used one of his Saturday radio addresses this month to press Congress to pass credit card form legislation, and conducted a town hall meeting in New Mexico on the subject. Obama said he wants a new law that would restrict lenders' ability to hike interest rates or tack on late fees. He also said he wants to reduce the fine print and excessive legalese in credit card agreements. These issues are the subject of complaints ConsumerAffairs.com has been receiving for years.

Delisa, of Bellingham, Washington, said she had been a Washington Mutual cardholder since 2006, with an interest rate of 14 percent.

"I kept my account in excellent standing, constantly paying off my account," she told ConsumerAffairs.com. "When Chase bought out Washington Mutual, I received a letter stating my interest rate would go up to 31.9 percent. This is ridiculous and should not be legal."

It probably won't be in the near future.

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