Barney Frank Moves to Push Credit Card Rules on Banks Early
Powerful members of Congress are looking to accelerate already-passed legislation that will greatly impact the credit card industry, including the debt collectors that service its members.
U.S. Reps. Barney Frank (D-Mass.) and Carolyn Maloney (D-N.Y.) have proposed legislation seeking to move up by more than two months the effective date of Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), commonly known as the Credit Cardholders Bill of Rights.
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The law, signed by President Obama at the end of May, included several restrictions for credit card companies in terms of rate changes and billing procedures. The first rules of the legislation are not slated to take effect until February 22, 2010. Other parts of the legislation will not take effect until August 2010. But the Expedited CARD Reform for Consumers Act of 2009, authored by Frank and Maloney, seeks to move up the date of enactment to Dec. 1.
The House Financial Services Committee, which Frank chairs, is scheduled to take up the new legislation Thursday.
Among the changes in the law:
- No interest rate increases during the first 12 months of opening a credit card, unless the rate increase was disclosed when you first opened the credit card.
- Promotional rates must last at least 6 months.
- No interest rate increases on pre-existing balances. If the credit card issuer decides to increase your interest rate, that new rate would only apply to new balances. The current balance would continue to be subject to the old interest rate. There's an exception, however, if the cardholder becomes more than 60 days late on your credit card payments.
- Credit card issuers must give a 45-day advanced notice before increasing your interest rate or making any major change to your credit card agreement.
Many card issuers have already instituted many of these changes and changed fee structures by raising interest rates, canceling cardholder accounts and reducing rewards programs. For example, Discover Card’s current promotion on 5 percent cash rewards on grocery store purchases is capped on the first $400 of purchases. After the cap is reached, card members receive unlimited rewards up to one percent.
But Tuesday, Bank of America issued a strong statement intended to stave off the accelerated implementation of the CARD Act. The major credit card issuer vowed not to raise interest rates between now and February, when the changes are slated to take effect. Cardholders could still see their interest rates increase, however, if their cards carry variable rates tied to the prime interest rate.
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Comments
Comment from DONALD DALY on October 7, 2009 at 11:04AM EST
TWO MONTHS! WHY ARE THESE FOOLS, BARNEY & MALONEY, WASTING TIME ON SIGNED LEGISLATION? I HAVE TO BELIEVE THAT THEY ALREADY INVESTED TIME AND ENERGY GETTING THIS PASSED, WHY THEN DO THEY FEEL A NEED TO RETRACE THEIR STEPS? ISN'T THERE ANYTHING ELSE FOR THEM TO DO? WHERE WERE THEY WHEN THE LEGILATION WAS PRESENTED, PASSED AND SIGNED? THE ONLY THING I CAN IMAGINE IS THAT IT IS A POPULAR TICKET AND BARNEY NEEDS ALL THE HELP HE CAN MUSTER IN THAT CATAGORY.
Comment from MJ on October 7, 2009 at 11:30AM EST
This is a classic win-win-lose scenario. The banks win - rest assured they won't lose money in this...they'll increase fees/rates somewhere else and remain whole. The politicians win - they get their faces in the news and get to say they championed a consumer cause. The consumer loses - most won't comprehend that nothing really happened and will continue to crank up high debt they cannot afford to pay back.
Comment from Anonymous on October 7, 2009 at 12:05PM EST
Who cares? These reforms were long overdue. Finance exists as a facilitator for the "buy now pay later" premise which stimulates SALES.
We are all in business for sales and lenders who are "eaking out" every penny REGARDLESS OF THE NOTIFICATION requirements are not supporting sales.
Attention lenders: Evaluate your risk and charge your low and high risk consumers the same rate to offset the good with the bad...spread your risk instead of picking on the uninformed consumer (like teens - which this legislation has stopped).
Comment from MJ on October 7, 2009 at 12:23PM EST
This is a classic win-win-lose scenario. The banks win - rest assured they won't lose money in this...they'll increase fees/rates somewhere else and remain whole. The politicians win - they get their faces in the news and get to say they championed a consumer cause. The consumer loses - most won't comprehend that nothing really happened and will continue to crank up high debt they cannot afford to pay back.
Comment from JASON CASH on October 8, 2009 at 9:16AM EST
Barney Frank preaching fiscal responsibility.. now THAT's chutzpah ! Why doesn't he focus his attention on cleaning up the Freddie and Fannie mess he created... better yet, just resign.
Comment from PSprague on October 8, 2009 at 2:51PM EST
Why not make this retroactive? After all, these CC companies think it's fine for them to raise our rates and make the new rate apply toward purchases that in some case were made a year or two earlier. Therefore, just what argument would they have if these consumer protection rules were retroactive? GO BARNEY!!!!
Comment from John Milner on October 12, 2009 at 8:16AM EST
What's the deal? Is Barney starting to realize the banks might actually be able to pay back the government, and thus not be under it's control? What if GM makes a profit? Under the current staff, government needs to own everything. You think healthcare is expensive now, just wait till it's free.