Senate Deal Could Lower Credit Card Rates

(AP)  Consumers who are paying more in interest because they have fallen behind on their credit card bills could regain their older, lower rates if they pay their bills on time for six months, under a compromise proposal reached by senators seeking changes in laws governing the credit card industry.

The Senate proposal was brokered between Republicans, who say lenders should be able to take into account a person's behavior, and Democrats, who contend that the practice of hiking rates on past balances prevent consumers from climbing out of debt.

The agreement was included as part of a broader package on credit card reform, announced Monday by Senate Banking Committee Chairman Chris Dodd, D-Conn. The bill was expected to pass this week with President Barack Obama's support.

Dodd had originally proposed an outright ban on retroactive rate increases. But without Republican support, his bill was considered unlikely to overcome procedural hurdles in the Senate.

The latest proposal would prohibit lenders from increasing interest rates on past buys unless the cardholder has fallen at least 60 days behind. At the same time, lenders would be required to review a cardholder's terms every six months.

"It makes a strong point to the industry that if they are going to change the terms of a card based on (risk) factors, it should be a two-way street," said Nick Bourke, manager of the Safe Credit Cards Project at the Pew Health Group.

Under the request by Republicans, the bill also would require the Federal Reserve to report to Congress every two years on the cost and availability of credit.

"Should this legislation become law, it is crucial that Congress carefully monitor its implementation and effect to ensure that this balance in design is also a balance in fact," said Sen. Richard Shelby of Alabama, the top Republican on the Banking Committee.

Senate Majority Leader Harry Reid told reporters on Monday that he thinks Republicans are jumping on board because they don't have a choice.

"I think they've come to the realization that there are a lot of good things they can be involved in. They can go home and take credit for helping us do this," said Reid, D-Nev.

Reid said the recent party switch by Sen. Arlen Specter, D-Pa., also has forced Republicans to become "more realistic."

Debate on the bill comes as the Center for Responsible Lending estimated that some 10 million cardholders have seen their interest rates increase in the last six months for no particular reason. Many cardholders have seen increases of 10 percentage points or more, the group says.

The Senate bill would require that promotional rates last at least six months. It also prohibits rate increases in the first year after an account is opened.

Other provisions in the bill would:

Require anyone under 21 to prove that he or she can repay the money before being given a card, or have a parent or guardian promise to pay off the debt if he or she defaults.

Require lenders to give customers 45 days notice before increasing rates and mail their bills 21 days before the balance is due.

Ban fees if customers want to pay their bills by phone or online.

Prohibit over-the-limit fees unless a cardholder elects to be allowed to go over their limit.

Require lenders to say how much time it would take and how much money in interest would be paid if only the minimum monthly payments are made.

Require that gift cards remain valid for five years.

The bill would go into effect nine months after enactment. The House passed its own version of the bill in April by a 357-70 vote.

[democracy1]

What a joke, Nothing will change. All congress has to do is stop the practice of allowing contracts to change during the contract period. How come it's a fixed contract on our part and a floating contract on the bank's part?
Posted by jtdev1 at 6:24 AM : May 12, 2009

That is a very good point. Sounds like a good "class-action" suit. And, no, I'm not a lawyer or interested in frivolous legal suits, but the poster brought up a very good question regarding the fundamentals of fair contract laws. Even if the law says that they can alter the contract in the fine print, I would suggest that they should not have the right to do that to begin with as it overrides the basic principle of fairness in contracts. And if that IS somehow legal, then THAT is a law that needs to be changed ASAP!

[enriquecaliente]

It's all fixed against us and both parties are to blame. They have their own vested interests and do not serve the people. They should have done better then this. Just look at how this whole credit card business is crafted to enslave the people.

Secret History of the Credit Card.
http://www.pbs.org/wgbh/pages/frontline/shows/credit/view/

Reminds me of how the Tobacco companies glamorized smoking knowing full well that it caused cancer and killed millions. And the Government didn't step in until they saw the people getting ready to revolt.

[jtdev1]

the real problems are these: (1) people that unable to manage their finances and over charge their credit cards and (2) having a federal government that is now injecting itself into the day-to-day mechanics of managing independent companies! the later is far worse than the first - where will it stop?
Posted by fctex at 8:01 AM




Are you talking about the same "Independent" companies that begged the US Government for our tax dollars (1 Trillion so far) ???

[craftycandi]

I just called my credit card companies and asked them to lower my rates.

One company lowered my rate from 28.99% to 9.24%. :)

You'd be surprised how willing the companies are to comply with your requests. Lowering your rates is better than the alternative (not paying the debt).

[fctex]

the real problems are these: (1) people that unable to manage their finances and over charge their credit cards and (2) having a federal government that is now injecting itself into the day-to-day mechanics of managing independent companies! the later is far worse than the first - where will it stop?

[jtdev1]

"Senate Deal Could Lower Credit Card Rates"


Wow - and I "Could" be the next US President..... NOT!


What a joke, Nothing will change. All congress has to do is stop the practice of allowing contracts to change during the contract period. How come it's a fixed contract on our part and a floating contract on the bank's part?

[grabandgo]

credit card execs should be in prison for the damage they have caused to this countries economy with their high interest rates.

[omega39-2009]

Too bad the great majority are not in the same boat.

I was fortunate that, as a young Marine, I served a tour in Japan - even learned Japanese.

That wasn't all I learned from them.

The typical Japanese is looking 20-30 years down the road and saves his money.

Most Americans are looking 5 minutes down the road to their trip to the mall.
Posted by formrusmcsgt a

That's also why the Japanese haven't shipped most of their job base to third world nations to the detriment of their own economy. Unlike the CEOs and idiots on Wall Street, they tend to look much further down the road than the next fiscal quarter.

[omega39-2009]

What a spineless, craven lot Congress is! Not just the usual lickspittle Repigs, ever anxious to suckie up to the Billionaire class, but even Dems, in a majority, can't work up the guts to tackle the Walstreeters.

Now we see who really own America.
Posted by johnb8888

It took you this long to come to that conclusion? Most of us had our "suspicions" confirmed when they used taxpayer money to pay AIG's bonuses.

[johnb8888]

What a spineless, craven lot Congress is! Not just the usual lickspittle Repigs, ever anxious to suckie up to the Billionaire class, but even Dems, in a majority, can't work up the guts to tackle the Walstreeters.

Now we see who really own America.