House OK's new protections against credit card abuses

WASHINGTON - The US House of Representatives approved legislation that seeks to protect consumers from lending abuses by credit card companies.

"The free ride is over; we're going to have some fair rules," Vermont Democrat Peter Welch said.

The credit card measure, which passed 312 to 112, requires a notice period for interest rate increases, prohibits interest charges on balances paid during grace periods, and bars issuers from applying payments first to lower-interest debt while debt carrying a higher interest rate remains unpaid.

Lawmakers have accused card issuers such as Citigroup Inc., American Express Co., and Discover Financial Services of luring borrowers into signing up for cards with confusing terms, then penalizing them with high fees and rates.

The credit card measure is opposed by President Bush and Republican lawmakers who say it would restrict credit options for consumers.

"Passing legislation like this will discourage investment in credit card lending," Texas Republican Pete Sessions said. "It is not wise policy to create a consumer credit crunch at the same time our economy is experiencing a massive commercial credit crunch."

Edward Yingling, the president of the American Bankers Association, said the measure will increase costs for consumers and restrict access to credit by making it harder for credit card issuers to manage risk.

The Bush administration said it opposed the credit card legislation because federal agencies, including the Federal Reserve, are drafting new credit card rules that should be released by the end of the year.

"Regulations are better suited to addressing these problems than legislation because they can be adapted more readily to changes in market conditions," the administration said in a statement.

The credit card measure would require a 45-day notice for any rate increases, prevent retroactive rate increases on prior balances, and require issuers to mail billing statements 25 days before the due date, instead of the current 14-day minimum.

The legislation is not likely to face Senate action before the end of the congressional session this year.