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Obama supports credit card reform
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Barack Obama is likely sign a bill to end abusive credit card practices if the legislation makes its way through Congress. Obama endorsed credit card reform during his Presidential campaign, specifically targeting unilateral rate hikes and rate changes on existing debt.
The Credit Cardholders' Bill of Rights was introduced Thursday by Rep. Carolyn Maloney, D-N.Y., in the House, and Senators Mark Udall, D-Colo., and Charles Schumer, D-N.Y. in the Senate. The legislation would take a number of steps to restrict credit card issuers, including:
- Banning retroactive rate increases on existing balances for cardholders in good standing. Rates could still be raised if a customer were more than 30 days late with a payment.
- Requiring 45 days' notice of all rate increases on new charges.
- Banning "double-cycle billing" which allows fees to be charged for balances that were already paid off.
- Allowing cardholders to cap how much they can charge to their cards, to avoid overdraft fees.
- Outlawing "universal default" clauses, which automatically hike rates on a card based on unrelated financial activity, such as being late paying another bill.
"A credit card agreement is supposed to be a contract, but in recent years cardholders have lost the ability to say no to unfair interest rate hikes and fees," Maloney said in a press statement. "This bill levels the playing field between card companies and cardholders while fostering fair competition and free market values."
Some of those provisions, including the bans on retroactive rate increases and on double-cycle billing, are among new regulations issued by the Federal Reserve and other federal agencies last month. But those new rules don't take effect until July 2010. Under Maloney's bill, the regulations would be enacted within 90 days after the President signed the bill into law.
The House passed a similar version of Maloney's bill last September, but the legislation failed to get out of committee in the Senate. The Schumer/Udall Senate version now goes up against the Credit Card Accountability, Responsibility and Disclosure Act, an even stronger bill sponsored by Senator Chris Dodd, D-Conn., head of the Senate Banking Committee.
The Dodd bill would prohibit all retroactive rate increases, regardless of whether cardholders were late with payments, as well as limit what kinds of fees banks may charge their credit card customers.
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