Congress on Wednesday sent to President Obama a bill that makes it tougher for credit card issuers to raise fees and interest rates.
The move caps a years-long crusade by consumer groups and Democrats to rein in what they say are abusive practices that prey on consumers. The approval came despite strong objections by banking industry advocates, who say it could result in tightened credit to Americans.
The House voted 361-64 in favor and also approved by 279-147 an unrelated measure allowing people to carry guns into national parks.
The Senate passed the credit card bill, along with the unrelated gun measure, by a 90-5 vote on Tuesday.
The bill is expected to be signed by President Obama as soon as Friday.
The credit card rules would take effect in February. The bill is moderately tougher on banks and card issuers than are new Federal Reserve rules set to take effect July 2010.
The legislation make it harder for people under age 21 to get credit cards. It would also ban rate hikes unless a consumer is more than 60 days late – and then restore the previous rate after six months if minimum payments are made.
The bill marks a major loss for the banking industry.
Financial services representatives have decried the bill, saying it would exacerbate the credit crisis and force banks to drop some risky credit card holders. The American Bankers Association said the legislation would prompt banks to reinstate annual fees and higher interest rates for all card holders, an outcome that would penalize those with good credit who pay their bills on time.
In recent months, credit card companies have been raising fees and interest rates. From November 2008 to February 2009, rates increased from an average to 13.08% from 12.02%, according to a Federal Reserve Board report.
(Source: CNN Money)
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5 Responses
This will make it much harder for people who shouldn’t be living off of loans from being able to borrow money. It will probably force banks to restrict loans to people who can pay them back.
Once upon time, banks loaned money to people only if the people were able to repay the loan, and people lived off their income rather than off their credit cards.
Well hello! That’s the point. Banks should not be lending money to people who cannot afford to pay them back in the first place. But what should have been done as part of this bill was to make the banks not use any bad credit info from the past 6 months in making their determinations.
#2 – the effect of the law is that bank will have to deny credit to those who can’t pay them back rather than their current strategy of making usurious loans and harassing their victims with fees – which has resulted in both sides of the deal being severely messed up (the borrowers are over their heads, and the banks are stuck with bad debts). Since banks won’t be able to harass those who fall behind, they will have to deny them large credit lines to begin with, so everyone will be better off in the long run.
As is the case with most liberal policies, this more symbolism over substance.
#4- there is real substance – banks will be forced to act more responsibly, and people will find it harder to borrow money especially if they want to borrow in a reckless manner