When Representative Carolyn Maloney of New York introduced the Credit Cardholder’s Bill of Rights to the House of Representatives in January, she hoped for fast action. She had introduced the same bill in 2008 and it had died with no action taken. However, this year, with consumers up in arms over credit card issuers’ behavior, she hoped for better results.
The results are better – the Bill passed through the House subcommittee and was sent on to the full House Committee on financial Services.
However, one of the primary hopes riding on this bill was that once passed it would be immediately signed by the President and would go into effect 90 days later.
That didn’t happen. Perhaps in an effort to pacify the financial services industry, Subcommittee members have agreed that card issuers will have a full year to enact the reforms. That means that this Bill, if passed, will take effect at approximately the same time as Federal Regulations already set to become effective in July 2010.
Those regulations were enacted by the Federal Reserve, Office of Thrift Supervision and the National Credit Union Administrator. The purpose in presenting the Credit Cardholders’ Bill of Rights was to give the weight of law to the regulations. In a statement made earlier this year, Representative Maloney pointed out that regulations are relatively easy to alter, while Federal laws are not.
While this discussion was going on in the House of Representatives, the Senate Banking Committee passed the Credit CARD Act, which is another attempt to reign in unfair lending practices. This is now set to go to the full Senate for a vote. If passed, this Act would go into effect in 9 months, rather than the 12 months set by the House Subcommittee.
The Senate version addresses some of the same issues as the House version, such as eliminating double-cycle billing, requiring issuers to mail bills 3 weeks prior to their due dates, and prevent issuers from charging a late fee if payments were mailed 7 or more days before the due date.
In addition, the Senate’s Credit CARD Act would limit aggressive marketing and irresponsible lending to young people with no means to repay the debt, restrict penalty fees, require that payments be first allocated to the balance with the highest interest rate, and eliminate:
• Retroactive rate increases, and
• Universal default
These last two items have perhaps been the biggest culprits in plunging Americans into default on credit card bills, because they apply to debt which was incurred under other terms. When minimum payments double under these practices, many consumers who were never in default before are simply unable to keep up.
Author:Marte Cliff
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