WASHINGTON — Every American with a credit card will see sweeping changes in the market, with limits on sudden hikes in interest rates that drive consumers deeper into debt. Even cardholders who pay off their balance each month may face new annual fees or lose out on rewards programs.
Congress sent the legislation Wednesday to President Barack Obama, who plans to sign it on Friday. The bill will restrict when and how a card company can raise an individual’s interest rate, who can receive a card and how much time people are given to pay their bill.
About the rules
In general, the new rules — which go into effect in nine months — will protect debt-ridden consumers from many of the surprise charges common in the industry, such as over-the-limit fees and costs for paying a bill by phone.
"This cements a victory for every American consumer who has ever suffered at the hands of the credit card industry,” said Sen. Christopher Dodd, D-Conn., chairman of the Banking Committee.
But there will be those who lose from the new rules, too.
Banks, which oppose the legislation, will need to make up the cost somewhere, and cardholders who pay off their balance in full each month could see new annual fees and lucrative rewards programs canceled.
Credit could become harder to come by too.
Some of the changes, including a requirement that cardholders receive 45-days notice before their rates are raised, are already on track to take effect in July 2010 under new regulations by the Federal Reserve.
The legislation would put these changes into law and go further in restricting when and how banks charge people and who could get a card.
For example, the bill would require people under 21 to prove first that they can repay the money or that a parent or guardian is willing to pay off their debt if they default.
Under the bill, a customer would have to be more than 60 days behind on a payment before seeing a rate increase on an existing balance. The lender would be required to restore the previous, lower rate if the cardholder pays the minimum balance on time for six months.
How they voted
The House passed the reform bill by a 361-64 vote on Wednesday. The Senate voted 90-5 on Tuesday in favor of the measure. Consumer advocates say it’s up to the banks to decide what happens next.
Nick Bourke, manager of the Safe Credit Cards Project at the Pew Health Group, said companies that are already offering transparent pricing won’t have to drastically change how they do business.
Two of the opposing senators — GOP Sen. John Thune and Democratic Sen. Tim Johnson — were from South Dakota, where thousands of jobs depend on the industry. Thune estimated up to 5,000 workers in the state would lose their jobs as a result.
by the associated press
Congress sent the legislation Wednesday to President Barack Obama, who plans to sign it on Friday. The bill will restrict when and how a card company can raise an individual’s interest rate, who can receive a card and how much time people are given to pay their bill.
About the rules
In general, the new rules — which go into effect in nine months — will protect debt-ridden consumers from many of the surprise charges common in the industry, such as over-the-limit fees and costs for paying a bill by phone.
"This cements a victory for every American consumer who has ever suffered at the hands of the credit card industry,” said Sen. Christopher Dodd, D-Conn., chairman of the Banking Committee.
But there will be those who lose from the new rules, too.
Banks, which oppose the legislation, will need to make up the cost somewhere, and cardholders who pay off their balance in full each month could see new annual fees and lucrative rewards programs canceled.
Credit could become harder to come by too.
Some of the changes, including a requirement that cardholders receive 45-days notice before their rates are raised, are already on track to take effect in July 2010 under new regulations by the Federal Reserve.
The legislation would put these changes into law and go further in restricting when and how banks charge people and who could get a card.
For example, the bill would require people under 21 to prove first that they can repay the money or that a parent or guardian is willing to pay off their debt if they default.
Under the bill, a customer would have to be more than 60 days behind on a payment before seeing a rate increase on an existing balance. The lender would be required to restore the previous, lower rate if the cardholder pays the minimum balance on time for six months.
How they voted
The House passed the reform bill by a 361-64 vote on Wednesday. The Senate voted 90-5 on Tuesday in favor of the measure. Consumer advocates say it’s up to the banks to decide what happens next.
Nick Bourke, manager of the Safe Credit Cards Project at the Pew Health Group, said companies that are already offering transparent pricing won’t have to drastically change how they do business.
Two of the opposing senators — GOP Sen. John Thune and Democratic Sen. Tim Johnson — were from South Dakota, where thousands of jobs depend on the industry. Thune estimated up to 5,000 workers in the state would lose their jobs as a result.
by the associated press
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