Deal on credit card reform bill
The top senators on the Senate Banking Committee have reached a compromise on a bill designed to protect consumers from abusive credit card industry practices, increasing the likelihood that the measure will become law.
Debate on the bill, co-sponsored by committee Chairman Christopher J. Dodd (D-Conn.), began on the Senate floor Monday afternoon.
President Obama has been pushing for swift passage, saying in his radio address Saturday that he wanted a bill ready for his signature by Memorial Day. Obama will discuss the issue during a town hall meeting in Albuquerque on Thursday, said Jen Psaki, deputy White House press secretary.
The Dodd bill offers stronger consumer protections than a rival version passed by the House, which mirrors new rules adopted by the Federal Reserve.
The Fed rules take effect in July 2010. The Senate bill’s protections would be in place nine months after being signed into law.
Dodd’s original bill had sought to ban all interest rate increases on existing balances.
Under the compromise measure, agreed to over the weekend by Dodd and Sen. Richard C. Shelby (R-Ala.), card issuers would be allowed to retroactively bump up rates for any borrower at least 60 days behind on payments. However, if the borrower subsequently paid on time for six months, the card issuer would have to restore the original rate.
The bill also would prohibit card issuers from increasing rates during the first year a credit card account was opened and would require them to get a customer’s permission to process transactions that would push the account balance over the credit limit. Another provision would require card issuers to post credit card agreements online.
“It’s a meaningful compromise that will significantly improve the credit card marketplace and stop abusive practices,” said Travis B. Plunkett, legislative director of the Consumer Federation of America.
The banking industry warned that the measure, by increasing costs, would force banks to restrict lending or raise rates and fees.
“We are concerned over the impact it will have on the ability of consumers, students and small businesses to get credit cards,” said Ken Clayton, senior vice president of card policy at the American Bankers Assn. “As we have said repeatedly, it is vitally important for policymakers to get the right balance of better consumer protection while not jeopardizing access to credit and the credit markets.”
The Senate could pass the compromise measure this week, forcing the chambers to try to reconcile the differences between their bills.
“While I expect some battles in the coming days from credit card companies and their allies in an effort to diminish these strict new rules, I stand ready to fight against any attempt to weaken the strong consumer protections in this bill,” Dodd said.
Trejos writes for the Washington Post.
Michael D. Shear of the Post contributed to this report.