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Congress votes for major new credit card rules

Posted May 20, 2009

— Congress on Wednesday sent President Barack Obama a bill with sweeping new rules for the credit card industry that will affect just about every American. The House voted 361-64 for the bill on Wednesday. The Senate had already approved the measure by a 90-5 vote on Tuesday.

The new restrictions will protect debt-ridden consumers from many of the surprise charges common in the industry, like over-the-limit fees and a charge to pay the bill by phone. People under 21 also will find it difficult to get a card.

“It will level the playing field and restore balance to credit card contracts,” said Rep. Carolyn Maloney, D-New York.

Credit Cards How will the new credit card rules affect you?

As banks scramble to make up for the lost revenue, cardholders who pay off their balance in full each month could see annual fees become the norm and lucrative rewards programs canceled.

"Many Americans depend on credit cards to get by in this economy, and today they have won a giant victory that ensures they are protected from practices that would drive them further into debt, while also making our economy stronger," said Sen. Christopher Dodd, D-Conn., chairman of the Banking Committee.

White House spokesman Robert Gibbs said Obama looked forward to signing the bill as quickly as possible.

"Obviously this has been something that the president has championed, that the president believes is important to protect consumers," Gibbs told reporters Wednesday. "This is important for people that are represented in this town but don't have a lobbyist. These are important reforms to protect consumers and to bring some commonsense rationality to our financial system."

Some of the changes, including a requirement that cardholders receive 45-days' notice before their rates are raised, are already on track to take effect in July 2010 under new regulations by the Federal Reserve. But the legislation would put these changes into law and go further in restricting when and how banks charge people and who could get a card.

For example, the bill would require people under 21 to prove first that they can repay the money or that a parent or guardian is willing to pay off their debt if they default.

And consumers who see their interest rate skyrocket because they have been late on a payment would get a chance at their older, lower rate if they pay their bill on time each month for six months.

The banking industry opposed the measure and said it could restrict credit at a time when Americans need it most.

The practice of charging higher rates and fees to cardholders with risky credit was devised as a means to protect lenders against the risk of default while keeping costs low for consumers who paid their bills on time, said Edward Yingling, president and CEO of the American Bankers Association, which opposes the legislation.

Yingling says the new rules will limit the card companies' ability to price according to risk. The result, he says, will be that every card holder will have to pay a higher interest rate to cover the cost when other customers default. Lenders also will be more reluctant to issue cards in general, he adds.

"Less credit will be available generally, which means some consumers and small businesses will not be able to obtain credit cards at all, particularly younger people and startup small businesses," Yingling said.

Dodd, who championed the bill, said this argument is absurd and "a little like Chicken Little."

Included in the bill is an unrelated measure by Sen. Tom Coburn, R-Okla., that would allow people to bring loaded guns into national parks and wildlife refuges.

The House approved that provision separately on Wednesday by a 279-147 vote.

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  • NCPictures May 21, 2009

    Believe as you must bill0.

    I never said that the rules restrict to whom they can lend to. I stated that these rules could make it more difficult, as the credit card companies will rein in to whom they lend. I DO believe that the credit card companies have brought some of this on themselves. Time will tell. And I dont trust ANYTHING the government does. Of course I am not a real fan of the credit card companies either.

  • bill0 May 21, 2009

    The credit card companies are trying to scare consumers - and apparently it is working on some people. None of the new rules restrict a credit card company from lending to any person and charging whatever interest rate they want. The only substantial change is that they will not be allowed to change your interest rates on previous purchases. If they offer you 5%, they have to give you 5%. If they want to charge 25%, they have to tell you they are charging 25%. That way, consumers have the information they need to make reasonable purchase decisions. If they still choose to play 25% interest for something they can't afford, then that is their bad decision.

  • readme May 21, 2009

    I agree with NCPictures. i think if the government makes life harder for the already-hurting credit card issuers, that will trickle down and hurt me. I would prefer the laws to stay the same, then I as a responsible consumer will read the fine print on the fees and rates, and I will defer buying that shiny new SUV if I can't really afford it.

  • NCPictures May 21, 2009

    Watch out! Whenever the government gets involved... WE will pay for it!

    So watch what happens now..... The credit card companies will close the accounts of the "poorer" people, and start to charge more fees for the more "well off". Net effect? Credit will cost more, and some will not get credit.

    I am here from the government, and I am here to help you..... NOT!!