Two similar pieces of legislation, both sponsored by Democrats who control both houses of Congress, aim to increase credit card regulation, which they say is necessary to protect consumers.
“This landmark bill, the first major credit card legislation ever passed by the (Senate) Banking Committee, is the strongest credit card reform legislation in Congress, and its immediate enactment would be one of the best ways Congress can help struggling families,” said Sen. Carl Levin, D-Mich. “Millions of Americans are facing the worst economic crisis of their lifetime, and their hardship is being compounded by unfair credit card fees and interest charges. The credit card reform bill would put an end to abusive practices such as applying higher interest rates retroactively to existing credit card debt, hiking interest rates on customers who pay on time, and collecting interest on credit card debts that were repaid on time.”
President Barack Obama co-sponsored a similar credit card reform bill in 2007, when he was still in the Senate.
The current Senate credit card reform bill, called the Credit Card Accountability, Responsibility and Disclosure Act, (Credit C.A.R.D.) would, among other things, prohibit credit card issuers from increasing interest rates on cardholders in good standing for reasons unrelated to the cardholder’s behavior, prohibit interest charges on debt paid on time or during a grace period, require a 45 day notice before imposing a higher interest rate, and offer protection for consumers under the age of 21.
The U.S. Senate’s Banking, Housing and Urban Affairs Committee recently approved the bill, authored and introduced by Banking Committee Chairman, Sen. Chris Dodd, D-Conn, who said it would end, “unfair credit card practices that force millions of American’s into debt.”
Sen. Herb Kohl, D-Wisconsin, is also a co-sponsor of the bill. However, Dawn Schueller a spokeswoman for Kohl, said Kohl wants to see what happens to the bill before it comes to the full Senate, before he decided which way to vote. A spokesperson for Sen. Russ Feingold, said he also has not decided if he will vote for the credit card reform bill.
One part of the bill would protect young consumers, particularly college students from having to pay high-interest credit card debt. People under 21 years old would have to complete a financial literacy course and get someone 21 or older to co-sign for them in order to even get a credit card. Credit card issuers would also be prohibited from mailing credit card offers to anyone under the age of 18.
A similar bill, called the Credit Cardholder Bill of Rights Act, is proposed in the House of Representatives. It is co-authored by House financial service chairman, Rep. Barney Frank, D-Mass., and Rep. Carolyn Maloney, D-N.Y.
The House bill, while similar to the Senate version, simply states that credit card policies are too complicated for consumers to fully understand, and will require them to change specific policies related to billing and fees.
Supporters of the legislation expect that some combination of the two bills will be signed by President Obama, and made law this year.
“The nation’s largest banks have put us in an economic ditch, but we’ve supported them. It is past time for Congress to go to bat for working families by passing common sense credit card reform,” Levin said. “We can’t allow the banks taking taxpayer dollars to impose unfair fees and interest charges on the same families footing the cost of the bank bailout. We can’t allow Wall Street to profit from credit card abuses imposed on Main Street.”