House Votes to Speed Up Credit Card Rules

Democrats Say Changes Are Needed Now Because Lenders Are Raising Rates

(AP)  The House has voted to impose tough new rules for credit card companies unless lenders agree to freeze interest rates and fees.

The bill, approved 331-92, would accelerate the February enactment date of legislation already passed by Congress that limits when and how banks can charge credit card customers.

The proposal's chances in the Senate were dim, where several lawmakers worried that a short deadline would hurt the industry and limit the availability of credit. But the House vote served as a warning shot to big banks that many lawmakers were fed up with reports of price gouging.

"This is both real and a lesson to them," said Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee.

Last spring, Congress passed legislation that would protect debt-ridden consumers from many of the surprise changes that have become common in the industry. President Barack Obama signed that bill into law in May and most of the new rules will take effect on Feb. 22, 2010.

Under the new law, lenders won't be able to increase suddenly rates on existing balances unless a person is more than 60 days behind on a payment. Banks also couldn't give cards to people under 21 unless a parent co-signed or the card holder could prove they had the means to pay back the loan.

To assuage concerns in the Senate that the restrictions were too onerous, Democrats gave banks nine months to prepare for the changes.

But lawmakers say that many credit card companies have used the grace period to hike rates. According to a recent Pew study, even the lowest interest rates offered on most bank cards have jumped by more than 20 percent since last year.

The study found Discover's lowest rate rose by 3 percentage points, from 9.99 to 12.99 percent. Capital One's lowest rate also went up by almost 3 percentage points. Bank of America, USAA and Target increased rates by 2 percentage points.

"The same companies that were in my office that claimed they needed months at least to make changes to their systems, apparently only needed in some cases days to find ways to raise interest rates and decrease credit limits on customers across the country," said Rep. Dan Maffei, a New York Democrat.

The House approved an amendment by Maffei to enforce the new rules immediately, instead of the Dec. 1 date proposed by the bill's sponsor, Rep. Carolyn Maloney, D-N.Y.

A separate provision, by Democratic Reps. Carolyn McCarthy of New York and Betsy Markey of Colorado, was adopted to allow banks to escape the regulations if they agree to freeze interest rates and fees until the February law takes effect.

The proposal was a nod to Senate Banking Committee Chairman Chris Dodd, who has proposed an immediate freeze on interest rates and fees on existing balances until February.

But a vote on either measure in the Senate was considered highly unlikely because of lingering concerns by many senators that the bill could restrict credit when Americans need it most.

Banks deny that they are hiking rates ahead of the February deadline and blame fee increases on the economic downturn. Lenders say that providing customers unsecured loans has become a costly business because of the large number of defaults. Restricting fees will limit access to credit, they say.

House Republicans that opposed the bill said Congress was to blame for the recent rate hikes because it meddled in the market and made it tougher on banks to lend money.

The bill "limits choice, rations credit, increases costs and it strangles innovation," said Rep. Spencer Bachus of Alabama, the top Republican on the House Financial Services Committee.

[rockcutr]

This all should bring real meaning to "filthy rich bankers". As long as people are willing to pay the jerks for their purchases with money that isn't there, so be it. I shall not ever use another credit card. Don't care if my credit rating sux. Means no thing to me. If there is no money, it cannot be spent by me.
In my reality, credit should be a criminal offence. The persistant gouging and taking from people due to unreadable card contracts shall continue untill these suits are forced to stop it completely. There really can be no compromise with these jerks. This is what the senate seems to want to do. That only says that the senators have their hands in the cookie jar. Welcome to the world of fat cats. Grow up people. Pay it off and get the heck outa Dodge. Turn your back on these demonic forces and they shall go away. Take your bat and your ball and go home, game over. After all it is your money these pitiful loosers are after. Don't let them even get a look at it. Rule one, "Do not feed the carniverous pony."

[owlgal]

Once again, REMEMBER who sided with big business and who sided with the people they were elected to represent.
Apparantly they need time to comply with the Senate's new rules but
can get those increase letters out there pretty quick.
Guess that is why they needed the time....to get the quick fix in before the new laws take effect.
Senators WAKE UP and listen to the people or you may be looking for a job with those banks you favor.

[AmzingGrace]

On the plus side however, Gold prices are up to almost $1100.00/oz. More than double what we paid for it.

[Ordflyer]

Same banks WE BAILED OUT WITH OUR MONEY - Bank of America for one raised my totally current *and now paid off in full) card to %33.00.

That's BS!!! The CEO of BOA needs to be in jail...

[AmzingGrace]

OK Senators - From a long standing GOP supporter - Pass that credit card bill NOW. These banks are becoming way too monopolistic and draconian in their behavior. Even the once angelic USAA bank has joined this parade of banks hiking rates on consumers.

Time to put an end to this junk. It will not dry up credit to the credit worthy. It will do so to the borderline borrowers but that isn't really a bad thing right now. In the long term this will actually work out to their benefit. Once banks realize that they need us as much as we need them, or more, then they will wise up. Right now they need a 2x4 upside the head to wake them up and knock some sense into them.

PASS this immediately and freeze rates NOW

[askagain]

This is what happens when bills are rushed through congress. Congress has been passing bills too quickly without thinking them through. Someone sent me a photograph of congressmen playing games and being on Face Book during a session of Congress. Congressmen are sometimes handed bills that contain hundreds of page the day of or the day before a vote. Is it any wonder that half-baked bills are being passed?

[Ordflyer]

Someone sent me a photo of Bank Executives taking our money and looking at Facebook from the MEGAYACHT that WE BOUGHT THEM....

FREEZE NOW!!!!

[bubbadubba]

What a difference since the Democrats took control of Congress.
Now instead of giving everything to the rich and big corporations, our Congress is actually doing things for working Americans.
Thank you Democrats, and I will never vote Republican again.

[jeannettelj]

Here was our situation. We had to borrow $4500.00 for an emergency as a cash advance. Three days later the entire amount was paid back on the credit card with an additional $1000.00. Then I learned that you can't "pay back" a cash advance and now we still owe $4583.00 on the original $4500. Then to make matters worse, our credit limit was reduced from $26,000.00 to $19,000.00 and the interest rate increased from 9.99% to 14.7%. I was under the impression that if you paid your bill on time, paid more than the minimum, that you would remain in good standing. So sorry to say the we have learned a valuable lesson. Never borrow cash for any reason and no matter how good a customer you think you are, the credit card companies will always screw you.

[askagain]

jeannettelj - Few people read credit card terms. I realize the language can be hard to follow. But, as with any financial transaction, it is important to understand the terms of a financial transaction. Did you call the credit card company ahead of time? A telephone call might have saved you a lot of expense and grief. What the credit card did is probably legal. The problem is you feel "screwed" even though you didn't make the effort to find out how it works, Twenty years ago, I was in the insurance industry and saw this often. People buy homeowner and automobile policies and never bother to read them.

[askagain]

correction

jeannettelj - Few people read credit card terms. I realize the language can be hard to follow. But, as with any financial transaction, it is important to understand the terms of a financial transaction. Did you call the credit card company ahead of time? A telephone call might have saved you a lot of expense and grief. What the credit card company did is probably legal. The problem is you feel "screwed" even though you didn't make the effort to find out how it works, Twenty years ago, I was in the insurance industry and saw this often. People buy homeowner and automobile policies and never bother to read them.

[SusanStoHelit]

There have been a number of reports of one company - Citibank IIRC (something starting with C) raising the rates on ALL cardholders, even those with good solid payment histories not remotely in default, to a whole fracking 29.99%!

Not only should they be required to live by the rules NOW, not later, but we should modify those rules - they cannot charge rates higher than what they were charging 5-6 months ago, without good reason (missed payments, etc.).

[hungry1968-17]

Actually, there should be a rule, that those rates should apply to ALL credit card holders, and they should have to stay in place for five years.

So they raise their rates to 29.99%, and those rates go into effect for EVERYONE - new and existing customers - and they HAVE to stay there for five years.

They won't get any new customers if they're charging outrageous rates, so this would prevent them from doing it.

[ctb4679]

It is a knee-jerk reaction to yesterday's elections. Too little, too late, and not enough. The Democrats are losing their base fast. I'm a Democrat and I'm fed up with the timid, zero leadership of Obama and the "it's all about me" Democrats in Congress (excepting Pelosi and others like her who are truly fighting for American citizens.) Bye bye Wyden, blue dogs, etc. And bye bye Obama. What a fake. He's about the status quo, he's not about change. He lied. I suspect he's just trying to look out for his own re-election, but he's got it wrong. He's lost his base and the independents and he hasn't and won't win a single Republican voter for 2012. Wish I'd voted for Hillary.

[SocietysNightmare]

I agree ..... too little, too late. I did vote for Hillary (BTW).

[ctb4679]

It is a knee-jerk reaction to yesterday's elections. Too little, too late, and not enough. The Democrats are losing their base fast. I'm a Democrat and I'm fed up with the timid, zero leadership of Obama and the "it's all about me" Democrats in Congress (excepting Pelosi and others like her who are truly fighting for American citizens.) Bye bye Wyden, blue dogs, etc. And bye bye Obama. What a fake. He's about the status quo, he's not about change. He lied. I suspect he's just trying to look out for his own re-election, but he's got it wrong. He's lost his base and the independents and he hasn't and won't win a single Republican voter for 2012. Wish I'd voted for Hillary.