Senate Passes Credit Card Reform Bill

(CBS/AP)  The Senate voted on Tuesday to prohibit credit card companies from arbitrarily raising a person's interest rate and charging many of the exorbitant fees that have become customary - and crippling - to cash-strapped consumers.

The overwhelming bipartisan vote of 90-5 was lawmakers' way of telling Americans that they haven't been forgotten amid a recession that has left hundreds of thousands jobless or facing foreclosure.

With the House on track to endorse the measure by week's end, President Barack Obama could see a bill on his desk by the end of the week.

"We've got too many hard-working families in Massachusetts struggling to keep their heads above water, and the last thing they need is to get whacked with unfair credit card fees," said Sen. John Kerry, D-Mass.

If Obama signs the bill as expected, the credit card industry in the next year would have 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 for free. They'd also have to give consumers a chance to spare themselves from over-the-limit fees and give them 45 days notice and an explanation before interest rates are increased.

In a key provision addressing a concept called "universal default," a customer would have to be more than 60 days behind on a payment before seeing his rate on an existing balance increase. Even then, the credit card company would be required to restore the previous, lower rate after six months if the consumer pays the minimum balance on time.

Left out of the bill, thanks to credit card industry lobbying: Two proposals to impose rate caps of 15 percent and 36 percent annual percentage rate on credit cards and other loans. (Read more from CBS News investigative producer Laura Strickler.)

The banking industry has warned lawmakers that the legislation would restrict credit at a time when Americans need it most. They defend their business practices as necessary to protect themselves when providing money to consumers with no collateral and little more than a promise to pay it back.

But members of Congress don't want to face voters in the 2010 election without proof that they are listening to constituents crushed by debt. They say credit card companies have gone too far.

"Any effort to restore confidence in our economy must start not on Wall Street, but in Main Street, and that's what the credit card situation is all about. It's about Main Street," said Senate Majority Leader Harry Reid, D-Nev.

Obama too has taken up the issue, most recently last week at a town hall meeting in New Mexico. He said that while free-flowing credit is important, the government cannot tolerate profits made by misleading working families.

"This is America and we don't begrudge a company's success when that success is based on honest dealings with consumers," Obama said. "We need reform to restore some sense of balance."

The vote on the credit card bill came as a senior House Democrat tried to assure small, local banks that they weren't the target of financial reform efforts in Congress.

The House Financial Services Committee, led by Rep. Barney Frank, plans to consider in June legislation that would create a government entity that would monitor risk and dissolve large financial institutions that threaten the financial system. The cost of a "systemic risk regulator" and "resolution authority" is expected to be borne by the banking industry.

"While we are considering how best to fund the resolution authority, I believe there is a consensus on the House Financial Services Committee that small banks that have not contributed to the problem should not be assessed for the fix," said Frank, D-Mass., in a statement released Monday.

As lawmakers focus on how to prevent another financial meltdown and rein in credit cards, foreclosure rates and joblessness are on the rise.

According to a report released last week by RealtyTrac Inc., the number of U.S. households faced with losing their homes to foreclosure jumped 32 percent in April compared with the same month last year. Nevada, Florida and California showed the highest rates.

Meanwhile, the jobless rate rose to 8.9 percent in April with predictions that it will probably hit the double digits.

[starleo146]

Don't get me wrong, but I am an Obama fan, anything devised by Chris Dodd has my utmost attention, there must be plenty of loopholes in this bill. Dodd is the chairman of the Banking COMMITTEE and he will on the surface make it look good, but underneath we haven't seen what is helping these banks. I have a feeling we will see all in about 6 months it will show up I feel. I hope I am wrong, but Dodd places these fears in my mind

[homespunlady]

No one is forced to run up unmanageable debt or pay exorbitant fees. If you can't pay cash, you probably can't afford it - old wives tale? Who cares.... its true.
Posted by despido at 5:25 PM : May 19, 2009

There is one exception to this statement that I'm well aware of - medical care.
I know of someone that had to face this - either cough up money NOW or go without emergency care -then when the HMO DENIED payment because LOSING EYESIGHT PERMANENTLY without care "WASN'T AN EMERGENCY" and the place he worked for informed him he's have to give up 25 PERCENT of his income or be "laid off" so they could keep being profitable... they first emptied savings and then resorted to credit.

The card went from 7 to 30 percent even though they paid on time and for the first time had to carry a balance. Trying to negotiate a lower rate worked in reverse for them and now the bank will use them as a "deadbeat" example since their SURPRISE "rate change" is pushing them into bankruptcy -they've tried every other avenue including taking every available job but the JACKED UP INTEREST on the medical bills have proven insurmountable.

ONE MORE REASON FOR UNIVERSAL HEALTH CARE

The insurance and credit industries have become KILLER LEECHES.

[collie61]

Poor old broken down Jimmy Carter. We are still paying for his mistakes. It appears that history will not be kind to him. Oh well.

[despido]

IF there were a cap on the interest it would be Unconstitutional wouldn't it? Posted by skyk-2009 at 4:04 AM

++++++++++++++++++++++++++++

WHAT????? There used to be a cap on interest rates, its called USURY. It was voided by Jimmy Carter on March 31, 1980 and became law the following July. Get your facts straight -

[despido]

So typical of the new Obama administration....

There appears an article touting some supposedly significant legislative achievement of Obama, and immediately afterward appears another article describing how loopholes in the legislation will be exploited. ....And he smiles.

[despido]

You moron. Just come out and say it...you care nothing about the legislation; you only care that the black guy is doing it. What a freaking idiot. Devalue the dollar? He idiot...that is not a direct process. Raise interest rates? They are at.05% retard...do you think they will be there forever? Enacting legislation to monitor the credit card companies from jacking up your rates with no warning or reason is a good thing, regardless of what your neocon hate-everybody who isn't trying to abuse everyone else around them for a dollar mentality that you apparently have. What a farkin jerk
Posted by texasbeta at 7:02 PM
++++++++++++++++++++++++++++++
Obviously you have no comprehension what-so-ever of the economy, finance or credit markets. Which is no doubt why you've resorted to becoming a follower, since you're already a loser by default. This legislation, if you researched at all, is quite beneficial to the very card issuers it is purported to regulate. They own Obama, they got everything they asked for.

BTW, the value of the dollar (and every currency) is a direct process of the foreign exchange markets. Thirty year bonds are paying over 4% and climbing rapidly, your paltry savings account is NOT where the FED borrows its money. Obama is taking the U.S. down the road of the late 70's and early 80's. Not many will enjoy the ride.

[newsfreek]

mrcrosbyll, ya who every you are, you had it pretty much perfect.....

[budmag06]

"Left out of the bill, thanks to credit card industry lobbying: Two proposals to impose rate caps of 15 percent and 36 percent annual percentage rate on credit cards and other loans"


After reading seven paragraphs of "those evil credit card companies" and "How great this is for the hard-working family" This little "doozie" is hidden way down in the eighth paragraph, tells it all. Since there are NO caps on interest rates, even if you pay your credit card bill every
month, you are going to get socked with 36% interest!!! Do you think the credit card companies are going to do without??? Thank you all Senators for this attack on the American family who are facing Obama's new taxation!!!

[strangeworld]

"The FED will have two choices - raise interest rates dramatically or devalue the dollar"

I question how the average guy will make any money on his savings if interest rates stay where they are...as far as the value of a dollar, the Bush administration quit reporting on how much new money was printed - any value that it still has is largely a perceived notion fed by those that stand to continue to fill their bank accounts if the story is belived by the unwashed masses.

[stevemd2]

I've got to talk about my own situation. We are probably in the upper 1% of net worth in this country. But we saved and saved, and paid off our home in 1981, and haven't had a mortgage since. We have about $300k invested in a 30 year old home in a upscale neighborhood, but not a McMAnsion.

I drive a honda civic - why - because not sending our money to the Saudis and Hugh Chavez's of the world is terribly important if our country is to get out of debt. My wife drives a honda Accord 4 cylinder. Also a great mileage car.
\
And we don't keep up with the Joneses. We have a big bulky 27 inch TV and won't replace it with a flat panel until it dies and isn't worth fixing.

And every year we give 5 figures to various social justice causes, including some to college scholarships. I've helped a couple kids I know get off dead center / fool around lives. One wwill enter Med school next fall. The other graduated National Honor society in Accounting from Clemson.

That is what life is supposed to be about. Not stealing from people for filthy wealth. And my two married kids, in their 30's, also own their homes, one free and clear, the other with only 50,000 mtg.

All of this from lessons my parents taught me about the great Hoover REpublican depression, and how that Jerk of a President did nothing, and it got worse and worse.

And that depression was world wide, and the collapse of Germany's economy -made the people susceptible to a right wing demagogue, and 50 million died to break that monstrosity, which was based not on "socialism" despite the name, but on hate and collusion between the govt and big business, looking for war profits.

BTW the name Bush is from the German Busche. And his grandfather Sen Prescott Bush's bank lent the Nazis tens of millions in the `1930s, helping them to rearm. You know the result.

[egresor]

I drive a honda civic - why - because not sending our money to the Saudis and Hugh Chavez's of the world is terribly important if our country is to get out of debt. My wife drives a honda Accord 4 cylinder. Also a great mileage car.
===
so instead of sending your money to those you mention you forgot to mention the part about not buying an american made car and sending your money to japan....didn't you?

oh.....didn't even think about that one!

:((