U.S. PIRG Consumer Blog: Landmark credit card bill passed by Senate Banking

We've joined other groups in praising (our joint release) Senate Banking Committee approval yesterday of the Credit CARD Act championed by its chairman, Chris Dodd (D-CT) (his release). Narrower companion legislation, the Credit Cardholders' Bill of Rights, HR 627 (Carolyn Maloney-D-NY) was considered in the Financial Institutions and Consumer Credit subcommittee today and the final vote should occur tomorrow. Last year, the House overwhelmingly passed the Maloney bill, but this year too many members of the committee are listening to bank demands to delay it. Every day this bill to ban unfair practices is delayed is one more day that banks can cheat consumers. So, unfortunately, the committee approved, on a voice vote, a Maloney-opposed and PIRG-opposed amendment co-sponsored by new chair Luis Gutierrez (D-IL) and several others to delay implementation of the bill from its as-introduced 90 days after passage to either one year after passage or July 2010, whichever comes first, to comport the bill with the similar Fed rules. The change was also opposed by Rep. Jackie Speier (D-CA) who said (paraphrase) that "the credit card companies change rules on us overnight, we've asked the car companies to change their entire business model within 60 days, and we want to give the credit card companies another year after passage to make some changes?" We agree with Rep. Speier. As for the Dodd bill, it takes effect 9 months after enactment.

Previous blog on the credit card bills. Excerpt from our release on the Dodd bill below the jump:

“The CARD Act recognizes that credit card companies target unsuspecting college students for overpriced credit cards even when they don't have jobs or an ability to repay," said Ilicia Balaban of ConnPIRG. "The bill requires them to treat students like they are supposed to treat other consumers, fairly."

The Federal Reserve Board issued rules to stop unfair credit card practices, giving the industry until July 1, 2010, to implement the new practices. A number of major card issuers are now increasing fees and interest rates on millions of Americans before the new rules take effect. The House of Representatives passed legislation last year that was similar to the Federal Reserve Rules and is likely to do so again this year.

The Credit CARD Act has a number of protections that extend beyond those of the Federal Reserve rules and House legislation. It requires credit card companies to stop:

Applying unfair interest rate hikes retroactively to balances incurred under the old rate.

Hitting consumers with high penalty fees that are not related to the costs that credit card companies incur.

Assessing hidden and unjustified interest charges on balances already paid off.

Piling on the debt that consumers owe by requiring them to pay off balances with lower interest rates before those with higher rates.

Offering credit to students and young consumers without considering their ability to repay the loan.