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WASHINGTON -- Congress is poised to take action on regulating credit card industry practices with legislation, taking the opportunity to address an issue with overwhelming popular and political appeal, The New York Times reported.
Lawmakers have been swamped by consumer complaints about excessive fees, sudden interest rate increases, unclear fine print, debt-ridden college students and the plethora of solicitations for more credit, the report stated.
Lawmakers say the time has come, particularly since consumers are being subject to new fees and higher interest rates during the recession—a time when they most need the flexibility provided by the cards, a situation Democratic Senator Carl Levin of Michigan, called a "double whammy," the report stated.
"We like credit cards—they are valuable vehicles for many people," Senator Christopher J. Dodd, a Democrat of Connecticut, told the newspaper. Dodd, the chairman of the Senate banking committee and author of the measure under consideration by the Senate, added: "It’s when these vehicles are being abused by the card issuers at the expense of the consumers that we must step in and change the rules."
Banks and credit card companies were able to escapes such scrutiny in the past, with help from lawmakers from Delaware and South Dakota, where credit card operations provide thousands of jobs, the Times reported. Vice President Joseph R. Biden Jr. of Delaware, a senator there, was an important industry ally.
Although Biden is in the White House, the president is pushing to rein in credit card industry practices. President Obama is expected to press for passage of legislation this week on a visit to New Mexico. Internal White House polls show near universal support for new rules on credit card issuers, according to the report.
The Senate bill does not cap or freeze interest rates, but it does impose several new restrictions on credit card companies, such as prohibiting companies from raising interest rates on existing balances unless a card holder was 60 days behind, and then lowering the rate to the previous level if payments were on time for six months. In addition, consumers would have to be notified of rate increases 45 days in advance, and companies would not be allowed to charge late fees if they were late in processing a payment, according to the report.
Moreover, statements would have to be mailed 21 days before payment is due, and it would become more difficult to provide cards to people under age 21. New account rates could not be raised within the first year, and promotional rates would have to be in effect for at least six months, among other measures, the report stated.
Banking industry officials warned, though, that making restrictions too tight could reduce lending for consumers and small businesses that rely on cards, the Times reported.
"We know in the end they are going to pass very tough legislation," Edward L. Yingling, president of the American Bankers Association, told the newspaper. "We just hope they don’t go overboard."
He added: "The industry recognizes that the product got way too complicated, and people didn’t understand it and perceived they were being treated unfairly."
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