House Passes Bill Imposing Tighter Rules on Credit Cards, Loosens Restrictions on Concealed Weapons
The Measure on Credit Cards Is Expected to be Signed by President Obama Within Days
By HUMA KHAN and SCOTT MAYEROWITZ
May 20, 2009—
In a move that could have a significant impact on the credit card industry, the House today voted 361-64 for a bill imposing new curbs on rates and fees levied by card issuers.
The Senate passed the credit card measure with an overwhelming majority on Tuesday -- a 90-5 vote.
President Obama said today he is planning to sign the bill into law later this week.
Referring to the mortage and housing bills he signed today, Obama said: "These two laws together with the comprehensive credit card reforms that I hope to sign later this week represent fundamental change that will help ensure a fair shake for hardworking Americans."
While a move on tighter credit card regulations by the House is likely to please some consumers, another measure has some scratching their heads.
In a separate 279-147 vote, the House approved an unrelated Senate amendment that permits concealed weapons in national parks and wildlife refuges where allowed by states.
Current regulations in national parks require that gun owners have their weapons unloaded and stored while they are in the park. But unless they are banned by state law, gun holders can bring their loaded weapons into national parks, which has some officials worrying that it would make it more difficult for them to pursue wrongdoers.
Five of the most-visited national parks are in states that allow concealed weapons.
Sen. Tom Coburn, R-Okla., and other pro-gun lawmakers pushed a vote on that amendment before the Credit Card Bill of Rights passed the Congress.
Coburn, when asked today what the Credit Cardholders' Bill of Rights has to do with guns, responded: "Easy. ... It's not about guns. It's about states' rights, being able to determine what is in the best interests of them and it's about the Second Amendment and it's not about bureaucrats telling Americans when their rights will be taken away."
In the Senate, 27 Democrats supported the measure, while 105 Democrats voted "Yes" on the House side.
Those who did not vote for the bill expressed outrage.
"Today is a victory for every American who holds a credit card," said Rep. Carolyn Maloney, D-N.Y. "I regret that added to it was the unrelated and dangerous gun bill, and we should not have had to do credit card reform at the barrel of a gun."
The credit card bill gives consumers expanded protections, fewer fees and more clarity.
White House Hails Credit Card Bill
"Many Americans depend on credit cards to get by in this economy, and today they have won a giant victory that ensures they are protected from practices that would drive them further into debt, while also making our economy stronger," said Sen. Christopher Dodd, D-Conn., chairman of the Banking Committee.
The legislation could bring a bit of breathing room for many American families struggling to pay their bills.
The legislation won't cap interest rates, as some had hoped, and the government can't force consumers to make prudent financial decisions. But this bill, within nine months, would require a new level of clarity for consumers where the rules of the credit card game would be at the very least clearly spelled out.
The main goals of the measure are to prevent unfair interest rate hikes, sudden changes in terms and eliminate exorbitant and unnecessary fees.
The banking industry has fought many provisions of the legislation, saying that it would restrict credit at a time when Americans need it most. The banks also said such fees and rates are necessary to protect them from consumers who have no collateral.
White House Press Secretary Robert Gibbs said the president "looks forward to signing" the credit card bill.
"This has been something that the president has championed, that the president believes is important to protect consumers," Gibbs said. "This is important for people that are represented in this town, but don't have a lobbyist. These are important reforms to protect consumers and to bring some common sense rationality into our financial system, and the president looks forward to signing it as quickly as possible."
Last week, Obama held a town hall style meeting in New Mexico to personally stump for this bill.
"This is America and we don't begrudge a company's success when that success is based on honest dealings with consumers," Obama said. "We need reform to restore some sense of balance."
In April, the president met with executives of 14 credit card companies and presented proposals he'd like to see, including banning unfair rate increases, doing away with confusing terms and conditions, issuing a simple default credit card and more accountability.
"The days of any time, any reason rate hikes and late fee traps have to end," Obama said at the time. "We want to preserve the credit card market. But we also want to do so in a way that eliminates some of the abuses and some of the problems that a lot of people are familiar with."
Protections for Credit Card Consumers
So what does this all mean for you?
Here is a guide to some of the legislation's key provisions:
Ends "Double Billing" Card issuers would be prohibited from imposing finance charges on balances repaid during the grace period. This billing process right now is hidden from consumers and difficult to understand.
Interest Rate Changes Cardholders would be given 45 days notice of interest rate and fee and finance charge increase, advance notice of any significant change in terms of the credit card account and require clear notice of right to cancel credit card when the annual percentage rate, or APR, is raised or significant terms are changed.
Ends "Universal Default" Card issuers currently raise rates for consumer behavior unrelated to the credit card. This so called "universal default" provision comes from the banks' use "any-time/any-reason" fine-print clauses to impose arbitrary rate hikes and would be prohibited.
Rate Hikes The bill would prohibit rate, fee, or finance charge increases on existing balances other than for the expiration of an introductory rate; a change in variable rate, an increase due to the failure of the cardholder to comply with the terms of a workout agreement or a 60-day late payment by the cardholder.
Rate Cuts Credit card issuers would be required to periodically review customer's payment habits and decrease their interest rate if warranted by the review. Also, customers who fell behind on their payments can reverse part of a rate hike with six months of on-time payments.
New Card Rates Card issuers would be prohibited from increasing rates on a cardholder in the first year after a credit card account is opened and require promotional rates to last at least six months.
Overlimit Fees Banks would be prohibited from charging an overlimit fee unless the consumer has expressly elected to permit the issuer to complete overlimit transactions on the account.
Earlier Statements Statements would need to be mailed 21 days before the bill is due. The current requirement is 14 days.
Payment Fees Issuers would be prohibited from charging a fee to pay a credit card debt, whether by mail, telephone, electronic transfer or otherwise, except for expedited service by a live service representative.
Minimum Payment ClarityCustomers would get detailed information about the total interest and amount of time it would take to pay off their balance if they only make the minimum monthly payments.
Gift Cards Also Regulated Under Credit Card Reform
Limited Cards for Those Under 21 Anybody under the age of 21 trying to get a credit card would either need the approval of a parent of guardian or proof of an independent source of income. If a parent is jointly liable for the account, credit limits can't be increased without the parent's written approval.
Gift Card Changes While not quite credit cards, gift cards are also under new regulations as a result of Congress' action. The cards would not expire and have their value wiped out less than five years after purchases. Some related fees and charges would also be eliminated.
ABC News' Z. Byron Wolf and Jonathan Karl contributed to this report.