Senate Overwhelmingly Passes Credit Card Fee Limits

The legislation would protect consumers and provide more clarity on rates.

ByABC News
May 19, 2009, 1:23 PM

May 19, 2009— -- Credit card consumers will soon see expanded protections, fewer fees and more clarity thanks to a so-called Credit Cardholders' Bill of Rights that is working its way through Congress. The Senate passed its version of legislation by a 90-5 vote this afternoon and the House has already approved its own version.

The two sides now need to reconcile a few differences and then send it on to President Obama who has said he wants to sign the act into law before Monday.

The legislation could add a bit of breathing room for many American families struggling to pay their bills. This 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.

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."

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.