THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING

Card issuers put on notice by House

Plan to speed up credit rules OK’d

By Anne Flaherty
Associated Press / November 5, 2009

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

Your article has been sent.

  • E-mail|
  • Print|
  • Reprints|
  • |
Text size +

WASHINGTON - The House voted yesterday to impose immediately tough new rules for credit card companies after voters complained of increased interest rates and steep new fees.

The bill, approved 331-to-92, would accelerate the enactment date of legislation passed this spring that limits when and how banks can charge borrowers.

The proposal’s chances in the Senate were dim, where several lawmakers worried a short deadline would hurt the industry and limit the availability of credit.

Democrats said the bill was a warning shot to lenders to stop price gouging. “This is both real and a lesson to them,’’ said US Representative Barney Frank, Democrat of Massachusetts, 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 Obama signed that bill into law in May and most of the new rules will take effect Feb. 22.

Under the new law, lenders won’t be able to increase rates on existing balances suddenly 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 cosigned or the cardholder 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 companies have used the grace period to increase 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 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,’’ said Representative 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, Carolyn Maloney, Democrat of New York.

Credit card rate increases

A recent study by Pew Charitable Trusts’ Safe Credit Cards Project compared interest rates being charged last December with rates in July. It found:

■ The lowest interest rates offered on most bank cards jumped by more than 20 percent.

■ 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 highest interest rates offered on most bank cards rose by 13 percent.

■ Bank of America advertised a 14.99 percent rate in December, which rose by 3.25 points to 18.24 percent in July.

■ Almost all contracts allowed banks to raise interest rates on outstanding balances at anytime - up from 93 percent in December 2008.

Source: Pew Charitable Trusts