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.

[dwilson59]

Rule #1

He who holds the Gold makes the Rules. If you put too many rules on the man that holds the gold then he will hold on to the gold.

[aldon62]

Hope he can digest the gold.

[Ordflyer]

Hold the gold too long AND PEOPLE WILL TAKE IT!!!!

[stn_sage]

My points are as follows:

1. This is obviously a 'knee-jerk' reaction to last night's election! That's right! The public is 'p-offed'...and incumbents are going home!

2. This action could have...and SHOULD have been taken to begin with!
As such, it's too little, too late!

3. It won't make any difference...because try as they do...to save their jobs in the House...the foot-dragging, do-nothings in the Senate won't agree to it! They have to EARN the campaign contributions they took from the credit card industry!

It's comforting to know that some of these Congresspeople jerking 'America' over, will be out of a job come this time next year! :)

[eyesopenwide]

While we wait for our "leaders" to rein in the greedy money grubbers, let me offer a few, very simple suggestions, that if followed, will dramatically change your money situation.

#1 Cut up, mutilate with extreme prejudice, destroy beyond usability, all of your credit cards.

#2 Only pay cash for all purchases, buy American made products if you're at all concerned about Americans having jobs, and only purchase when you have the entire purchase price in cash.

#3 When in doubt refer to rule #1 + #2.

Or maybe you enjoy giving some bank somewhere 20% of your paycheck just for the privilege of spending money you don't have.

[Skirtlifters]

#1 Not practical. Too much emphasis is put on FICO, and you need your cards to have a good score. So we could simply pay off the cards in full every month...carry no balances.

#2 Americans are not used to living within their means. Plus, if we did, gross receipts for manufacturers and retailers would plummet putting more downward pressure on the economy.

#3 When in doubt? Punt!

[eyesopenwide]

Skirtlifters

#1 Easy credit got us into this situation. If you pay cash you will never have to worry about some score where they rate your ability to become a monthly slave to the money grubbers.

#2 Also part of the problem, which is why we got into this insolvent position to begin with, because folks refuse to live within their means. And quite frankly if our economy cannot take an adjustment toward solvency then the system is flawed and should be allowed to fail.

#3 If you don't mind giving 20% of your paycheck to the money grubbers then you should take some classes in finance.

Punt? Yes punt all your credit cards into the trash can.

[dwilson59]

Skirtlifters and eyesopen wide

You both bring up a good point. This is what I did when I lost everything in 2001 I started everything over. I have 2 cards now with a balance of $254. If I need something I put it on my credit card (new Air conditioner when I bought my first house) kept a balance for one month then paid it off. I paid an extra $50 in interest. This way I only pay for stuff I can afford to pay off. This keeps my credit score up also.

This is just my opinion and it has worked out good for me.

PS the reason banks charge so much is they have to write off so much debt. If a person has a credit score of 300 are you going to give him a loan for a auto at 8.5%? No he will get a car that should cost 2000 charge him 5000 and lo-jack it when he does not pay.

[Skirt-Lifter]

eyesopenwide,
"Or maybe you enjoy giving some bank somewhere 20% of your paycheck just for the privilege of spending money you don't have."
___________
I never pay a cent to these "money grubbers".

For now, we have to play the game. I hear ya tho, something has got to change. Unfortunately, I feel only a complete revolution will facilitate the change we need (not the 'change' that got Mr. Obama elected)

[Skirt-Lifter]

dwilson59,

I hear you too. I have one of each (4) cards. Visa, MasterCard, AmEx, and Discover. I play one against the other, get my 5% back, and pay EVERYTHING with credit. All paid off, in full, before penalties accrue.

And you are correct about the low score folks scamming the system. They cost ALL OF US. "Scamming the man" can sound justifiable, but in reality, us normal working folks pay.

[aldon62]

There's a deeper problem here. I was in the credit industry for 25+ years, the last 10 at a senior level with Citicorp(now Citigroup). The problem that most of us are facing now is largely due to FICO and how our credit scores are compiled. We currently have just 3 credit national credit cards, two with a 25,000 limit and one with a much smaller limit that we use and pay off every month. One of the larger lines was used for a medical emergency and once was over 17,000. The rate on that card is "fixed" at 3.99%, unless we use it for anything else. We pay that every month, plus extra and now owe less than 4,000. Credit scores consider equity in our credit lines as a "plus" in arriving at your number. So, here's the equation, we have a 25,000 line with a zero balance and a 25,000 with a 4,000 balance, plus the smaller account, let's say with a 5,000 limit that is paid each month, so we have a 51,000 "equity" and are considered a very safe credit risk. Because we don't often use the 25,000 balance with a zero balance, that line will shortly be cancelled, and our "equity" will plummet 25,000, thusreducing our credit score. Have we changed? No, but when that occurs (and it will before 2/22/10), our credit score will drop; guess what? When that happens, future offerings will be at a much higher rate of interest. This is absolutely crazy! Credit scores need to be outlawed, or at least come under the proposed consumer protection laws that are currently being considered by congress and the administration. The way they're presently designed leads to higher interest rates on credit worthy individuals and lower lines of credit that will deepen this financial pitfall that we're currently in.

[Floretta52]

The card issuers are ALREADY restricting credit. Time to play hardball with them. If they can up my rates in days, they can adjust theirs to new limits in just as short a time.