Credit Card Bill Passes One Hurdle
For a while last night, it seemed that Rep. Carolyn Maloney's bill proposing a crackdown on the credit card industry was doomed.
Rep. Mike Castle (R-Del.) was pushing an amendment that would kill the bill and substitute a congressional resolution in support of the Federal Reserve's proposal to rein in "unfair and deceptive" credit card practices, such as arbitrarily raising interest rates on outstanding balances. The Fed is accepting public comments on that proposal until Monday.
Consumer advocates said such a move would have weakened both Congress' and the Fed's resolve to reform the industry.
After much debate, though, Maloney's "Credit Cardholders' Bill of Rights" passed the House Financial Services Committee by a vote of 39 to 27. Among the yes votes were two prominent Republicans--Christoper Shays, of Connecticut, and Walter Jones, of North Carolina. Maloney, a New York Democrat, will now bring it up for a full House vote.
"We overcame a huge hurdle today," Maloney said last night. "This is the first time a congressional committee has ever passed consumer protections for credit cardholders. But, we are not out of the woods just yet."
That's because the banking industry is not going to back down.
"In its current form this bill seeks to lock into law restrictions on fundamental risk management activities, the way interest is calculated, and other responsible business practices," said Edward L. Yingling, president and chief executive of the American Bankers Association. "The result will be higher costs for consumers, reduced access to credit for those with an imperfect or limited credit history, and less access to low credit options."
The bill did not pass in its original form. For instance, it now prohibits the retroactive application of an interest rate increase on existing balances unless the customer is more than 30 days late. The original proposal said card companies could not apply a higher interest rate for so-called universal default -- that is, if a cardholder is late on payments to other debtors. Any other increase would have required 45 days' notice. But Maloney also added a provision prohibiting the issuance of credit cards to individuals under the age of 18.
Consumer advocates applauded the committee's decision, calling it a landmark move.
"Its overwhelming passage through the very pro-industry Financial Services Committee sends a strong message to the Fed that it should finish the job and do it well, with no weakening changes," said Ed Mierzwinski, U.S. PIRG Program Director.
Mierzwinski said, however, that he did not think the bill would pass into law this year because time is running out.
Nonetheless, expect a battle to ensue over the next few months as Congress, the Fed, and credit card companies try to work out a compromise.
By Nancy Trejos |
August 1, 2008; 9:52 AM ET
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