WASHINGTON — The Senate voted overwhelmingly Tuesday to rein in credit card rate increases and excessive fees, hoping to give voters some breathing room amid a recession that has left hundreds of thousands of Americans jobless or facing foreclosure.
The House was on track to pass the measure as early as today, paving the way for President Barack Obama to see the bill on his desk by week’s end.
"This is a victory for every American consumer who has ever suffered at the hands of a credit card company,” said Sen. Christopher Dodd, D-Conn., chairman of the Banking Committee. The bill passed the Senate 90-5.
What would happen?
If enacted into law as expected, the credit card industry would have nine months to change the way it does business: Lenders would have to post their credit card agreements on the Internet and let customers pay their bills online or by phone without an added fee. They’d also have to give consumers a chance to spare themselves from over-the-limit fees and provide 45 days notice and an explanation before interest rates are increased.
Some of these changes are already on track to take effect in July 2010, under new rules being imposed by the Federal Reserve.
For example, the Senate bill requires those 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.
More flexibility
The legislation would not cap interest rates as some lawmakers had hoped. It also wouldn’t prevent lenders from finding new ways to drain customers’ bank accounts or keep consumers from spending money they don’t have.
But it would give spenders more flexibility and outlaw many of the surprise costs associated with credit cards at a time when money is tight in most households. For example, under the bill, a cardholder would have to opt to be allowed to go over a credit limit. If customers don’t agree and the bank authorizes a charge that would push them over their limit, the lender couldn’t levy an over-limit fee.
The banking industry opposed the overall measure and said it could restrict credit at a time when Americans need it most. Banking officials defended their existing interest rates and fees on grounds that their business is very risky.
‘Universal default’
Another boon for consumers in the pending credit card bill is limiting a practice known as "universal default,” when a lender sharply increases a cardholder’s interest rate on an existing balance because the customer is late paying that bill or other, unrelated bills. Under the new legislation, a customer would have to be more than 60 days behind on a payment before seeing a rate increase on an existing balance.
Even then, the credit card company would be required to restore the previous, lower rate after six months if the cardholder pays the minimum balance on time.
by the associated press
The House was on track to pass the measure as early as today, paving the way for President Barack Obama to see the bill on his desk by week’s end.
"This is a victory for every American consumer who has ever suffered at the hands of a credit card company,” said Sen. Christopher Dodd, D-Conn., chairman of the Banking Committee. The bill passed the Senate 90-5.
What would happen?
If enacted into law as expected, the credit card industry would have nine months to change the way it does business: Lenders would have to post their credit card agreements on the Internet and let customers pay their bills online or by phone without an added fee. They’d also have to give consumers a chance to spare themselves from over-the-limit fees and provide 45 days notice and an explanation before interest rates are increased.
Some of these changes are already on track to take effect in July 2010, under new rules being imposed by the Federal Reserve.
For example, the Senate bill requires those 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.
More flexibility
The legislation would not cap interest rates as some lawmakers had hoped. It also wouldn’t prevent lenders from finding new ways to drain customers’ bank accounts or keep consumers from spending money they don’t have.
But it would give spenders more flexibility and outlaw many of the surprise costs associated with credit cards at a time when money is tight in most households. For example, under the bill, a cardholder would have to opt to be allowed to go over a credit limit. If customers don’t agree and the bank authorizes a charge that would push them over their limit, the lender couldn’t levy an over-limit fee.
The banking industry opposed the overall measure and said it could restrict credit at a time when Americans need it most. Banking officials defended their existing interest rates and fees on grounds that their business is very risky.
‘Universal default’
Another boon for consumers in the pending credit card bill is limiting a practice known as "universal default,” when a lender sharply increases a cardholder’s interest rate on an existing balance because the customer is late paying that bill or other, unrelated bills. Under the new legislation, a customer would have to be more than 60 days behind on a payment before seeing a rate increase on an existing balance.
Even then, the credit card company would be required to restore the previous, lower rate after six months if the cardholder pays the minimum balance on time.
by the associated press
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