For the second time in less than twelve months, the House of Representatives passed has legislation to reform the credit card industry.
The "Credit Cardholder's Bill of Rights," which passed the House last year but did not go to the Senate, was passed again by the House today in an even more decisive margin than last time. By a vote of 357 to 70, the House voted to pass Rep. Carolyn Maloney's (D-NY) bill that would restrict some of the more abusive practices of credit card lending.
"This is an important bill that affects many people," Maloney said today. "It is hard for me to come to the floor of Congress or walk down the street without hearing some story of some type of credit card abuse."
The earlier version of the bill would prohibit sudden interest rate hikes, such as those imposed by many banks on cardholders of late, as well as charging late fees even when payments are mailed a week in advance, and "trailing interest," where fees are charged on the interest of balances already paid.
House Democrats added several amendments to the bill when passing it today, including one requiring lenders to maintain low "teaser" rates for at least six months, and to warn cardholders if their balance is about to exceed their credit limit, thus triggering an "overlimit" fee.
"The credit card industry and some Members have been quick to condemn this legislation," said Rep. Bill Pascrell (D-NJ), "but today, I ask those who have spoken against the legislation, 'What possible detriment is there in increasing transparency in the imposition of fees? How can we possibly be against empowering Americans in taking control of their credit card finances?'"
The bill mandates that the finance industry implement the new rules one year from passage or by July 2010, whichever comes first. That month will be when new regulations from the Federal Reserve, also designed to rein in abusive credit card practices, take hold. Critics have said that the one-year timeline is still too long, and gives banks plenty of time to institute new fees while simultaneously tightening credit limits.
President Obama's recent summit with finance industry executives over credit card abuses is a strong indicator he will support the bill.
The Senate Banking Committee also passed companion legislation, sponsored by committee chairman Sen. Chris Dodd (D-CT), that would similarly restrict some lending practices. The bill must pass the Senate and be reconciled with the House legislation before it can become law.
