If enacted into law, the Senate bill would force credit card companies to be more selective about their customers and to improve transparency about agreements and rate changes.
(Mark Lennihan/ Associated Press/ File 2005)
Senate OKs credit card overhaul
If enacted into law, the Senate bill would force credit card companies to be more selective about their customers and to improve transparency about agreements and rate changes.
(Mark Lennihan/ Associated Press/ File 2005)
WASHINGTON - The Senate voted overwhelmingly to rein in credit card rate increases and excessive fees yesterday, hoping to give voters some breathing room amid a recession that has left hundreds of thousands of Americans jobless or facing foreclosure.
The House was on track to pass the measure as early as today, clearing the way for President Obama to see the bill on his desk by week's end.
"This is a victory for every American consumer who has ever suffered at the hands of a credit card company," said Senator Christopher Dodd, a Connecticut Democrat and chairman of the Banking Committee. The bill passed the Senate 90-5.
If enacted into law as expected, the bill would give the credit card industry nine months to change the way it does business: Lenders would have to post their credit card agreements on the Web and let customers pay their bills online or by phone without an added fee. They'd also have to give consumers a chance to spare themselves from over-the-limit fees and provide 45 days notice and an explanation before interest rates are increased.
Some of these changes are already on track to take effect in July 2010, under new rules imposed by the Federal Reserve. But the Senate bill would put these changes into law and go further in restricting the types of bank fees and who can get a card.
For example, the Senate bill requires those younger than 21 who seek a credit card to prove first that they can repay the money or that a parent or guardian is willing to pay off their debt if they default.
Bankers warned the measure would restrict credit at a time when Americans need it most. They defended their existing interest rates and fees on grounds that their business - lending money to consumers with no collateral and little more than a promise to pay it back - is very risky.
"What has been a short-term revolving unsecured loan will now become a medium-term unsecured loan, which is significantly more risky," said Edward Yingling, president and chief executive of the American Bankers Association.
"It is a fundamental rule of lending that an increase in risk means that less credit will be available and that the credit that is available will often have a higher interest rate," Yingling added.
Voting against the Senate measure were Republican Senators Lamar Alexander of Tennessee, Robert Bennett of Utah, Jon Kyl of Arizona, and John Thune of South Dakota, as well as Democratic Senator Tim Johnson of South Dakota.
© Copyright 2009 Globe Newspaper Company.
