‘Credit Card Holders’ Bill of Rights’ Clears House, Senate Vote is Next Step Toward Law
A proposed law that would seek to protect millions of American credit card users from sudden interest rate hikes, unannounced late fees, and other common practices has cleared a key hurdle toward passage.
The measure, dubbed the “Credit Card Holders’ Bill of Rights,” would make it illegal for credit card companies to engage in double-cycle billing and retroactive rate hikes while banning companies from issuing cards to people under age 18. Consumer advocates and some Democratic leaders have long pushed for greater protections for consumers who fall prey to deceptive credit card billing and other shady business practices.
Double-cycle billing does away with the interest-free period afforded to consumers who go from paying the full balance every month to carrying a balance on their cards. Retroactive rate hikes are increases in the interest rate on an account that are announced at the end of a billing cycle, but applied to the past period’s charges.
House Gives Overwhelming Support
The House of Representatives passed its version of the law today by a vote of 357-70. Similar legislation is now pending in the U.S. Senate and a final version of the law could be delivered to President Barack Obama for his signature by Memorial Day, supporter says. Obama has said he supports restrictions on the credit card industry to end what he called “abusive fees and penalties.”
“A big vote in the House will create an even bigger momentum as it goes to the Senate,” said House Speaker Nancy Pelosi, a supporter of the new restrictions.
If passed into law, most of the new protections would not go into effect for a year. However, the requirement that cardholders get 45 days notice before an interest rate increase would take effect 90 days after the measure is signed, officials said.
Opponents Cite Costs to Card Companies
Opponents of the new restrictions, including some House Republicans, note that the cost of limiting interest rate hikes and other practices will cost the credit card industry more than $10 billion a year.
Defaults on credit cards have swollen as the deepening economic recession and near-record unemployment rates tap American consumers. Meanwhile, banks that have taken huge losses in the mortgage crisis have been forced to write off tens of billions of dollars in losses from credit card users.
In the past decade, the rate of credit card debt in the United States has jumped 25, reaching $963 billion in January 2009, according to White House statistics. The average outstanding credit card debt for households that have a credit card was $10,679 at the end of 2008, according to CreditCard.com.
“At a time when millions of families continue to struggle to make ends meet, additional safeguards are needed to ensure consumers are not being saddled by questionable industry practices,” said the American Association of Retired Persons, a lobbying group representing millions of American seniors that supports the bill.
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