ABA Comments on House Committee Pasage of H.R. 3639, the Expedited Card Reform for Consumer Act of 2009

WASHINGTON – Following passage of the Expedited CARD Reform for Consumers Act of 2009 (H.R. 3639) today by the House Financial Services Committee, ABA Senior Vice President and General Counsel Kenneth J. Clayton reiterated concerns that this legislation will increase the already substantial compliance burden on card issuers, cause massive confusion for cardholders and further restrict credit for consumers and small businesses.

“The CARD Act represents the most sweeping reform of the credit card industry in decades and requires a major overhaul of intricate business practices by card issuers,” said Clayton.  “Banks are working diligently to implement the CARD Act by next February, as Congress required, but it would be extremely difficult, if not impossible, for them to meet the new deadline contemplated by this bill.  Moving up the implementation date will place additional strain on institutions and is likely to further restrict access to credit at a time when consumers, small businesses and the broader economy need it the most.”

Significantly, federal regulators are still in the process of finalizing rules pursuant to the CARD Act.  If H.R. 3639 were enacted it would create a scenario where card issuers are required to comply with rules that are not yet in place.  This would expose banks to significant risk of litigation and also cause a lot of confusion for both banks and their customers.  The result could be a dramatic pull-back in lending.

“Issuers need to focus on making the implementation process as seamless as possible for their customers,” said Clayton.  “The accelerated timeframe and added complexity will have exactly the opposite effect, creating unnecessary problems for card issuers and making things more difficult for consumers.”

Clayton also noted that consumers are already protected from unexpected interest rate increases by a provision of the CARD Act that requires 45-day advance notice of any potential rate increase and gives cardholders the right to just say “no” to the increase.  This provision took effect last month.

“Consumers are already protected by the new 45-day notice provision, raising the real question of whether further action is necessary given the downsides for both consumers and the broader economy.”