Today the Senate overwhelmingly voted to “put new restrictions on the credit card industry, passing a bill whose backers say will make card-issuers spell out their terms in fewer words, using plain English, and treat customers more fairly.”
The 90-5 vote, following a 357-to-70 vote in the House on April 30, made it likely that President Obama will have a measure on his desk before the Memorial Day recess.
There are still differences between versions of the bill from the House and Senate that will need to get ironed out, but “it seems likely that the House-Senate negotiations will move quickly.”
Among other things, the Senate measure would prohibit companies from raising interest rates on existing balances unless a card holder was 60 days behind, and then it would require the rate to be restored to its previous level if payments were on time for six months. Consumers would have to be notified of rate increases 45 days in advance. And companies could not charge a late fee if they were late processing a payment.
Statements would have to be mailed 21 days before a payment was due. It would be harder for companies to issue cards to people under age 21. Rates could not be increased within the first year, and promotional rates would be in force for at least six months.
In the past 10 years, credit card debt has “increased by 25 percent” and delinquency rates are “up by more than a third since 2006.”
Americans pay $15 billion in penalty fees a year, accounting for about 10 percent of the industry’s revenues. About one-fifth of those carrying credit card debt pay more than 20 percent in interest.
The credit card industry has “gone largely unregulated for decades,” and consumer advocates said “the Senate’s action showed a solid commitment to consumer protection.”
“This is landmark legislation that is going to make the credit card marketplace more transparent and more fair for millions of consumers,” said Travis B. Plunkett, legislative director for the Consumer Federation of American. “In particular, it’s going to prevent credit card companies from suddenly and unjustly increasing interest rates which is pushing many consumers with credit card debt into bankruptcy.”
Needless to say the corporate credit card ho’s on Wall Street aren’t too happy about getting the slap down from Congress. They’re hitting back with the claim that the credit card reform bill could mean that good credit card users may end up paying more.