House Passes Expedited Credit Card Reform Bill

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, Nov. 5, 2009.

The House of Representatives voted 331 to 92 on November 4 in favor of H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009, which would speed up the effective date of credit card reform legislation from Feb. 22, 2010, to immediately upon signing of the bill.

The bill was introduced in reaction to reports that credit card companies were abusing the grace period by altering rates and terms after President Obama signed reform legislation in May. A recent report from The Pew Charitable Trusts found that advertised credit card interest rates rose an average of 20 percent in the first two quarters of 2009, even as banks’ cost of lending declined.

Rep. Carolyn Maloney, D-N.Y., a co-sponsor of the bill, noted that “card companies have redoubled many of the abusive practices that brought Congress to pass my original reforms last spring. Rather than use the time…to prepare for the changes, they’ve raised rates and fees with absolutely no regard for the dire position of millions of their customers.”

H.R. 3639 includes a provision that allows any card issuer to be exempt from the earlier effective date if they adopt a moratorium on interest rate increases on current balances and new balances incurred between the date of enactment and Feb. 22, 2010. The bill would also exempt small credit card issuers that frequently outsource computer programming functions, and gift card providers.

The banking industry, meanwhile, said accelerating the implementation date would be “extremely difficult, if not impossible.” The American Bankers Association said bringing the implementation deadline forward would create “significant confusion for consumers and will further restrict access to credit for both consumers and small businesses.”

According to the Pew research gathered in July on nearly 400 cards, 99.7 percent of bank cards allowed issuers to increase interest rates on outstanding balances, up from 93 percent in December 2008. The report also showed that 95 percent of bank cards permitted issuers to apply payments in a way the Federal Reserve Board found likely to cause substantial financial injury to consumers.

On the Senate side, Senate Banking, Housing and Urban Affairs Committee Chairman Chris Dodd, D-Conn., has introduced legislation that would immediately freeze credit card interest rates, fees and finance charges on existing balances.

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