Press Releases :: November 4, 2009

House Passes Expedited Credit Card Reform Bill

Baldwin Calls Industry Actions “Shameful”

Congresswoman Tammy Baldwin today voted for critical reforms in the credit card industry that will quickly protect consumers from abusive practices. The legislation passed today (331-92) in the House moves up the start date of regulations and consumer protections previously scheduled to go into effect in February.

Last May, the Credit Card Accountability Responsibility and Disclosure Act (The CARD Act) was signed into law. This law imposes tough regulations on the credit card industry and gives consumers the tools they need to manage their own credit. The new regulations were set to be phased in over the period of a year, with the latest effective date of August 2010.

Since May 22nd, however, many credit card companies have seized the opportunity before the regulations go into effect to raise interest rates and decrease credit limits on their consumers.

The bill passed today, the Expedited Card Reform for Consumers Act, H.R. 3639, will make critically necessary credit card reform effective immediately after the President signs the bill into law.

“The actions of big banks and credit card companies in recent months have been shameful,” said Congresswoman Baldwin. “Wisconsin families have enough trouble making ends meet during this recession. Many were shocked recently by notices from greedy credit card companies that their interest rates would rise dramatically without justification. Our actions today will more quickly rein in the deceptive practices of the industry and provide much-needed financial relief to consumers,” Baldwin said.

Reforms to be enacted include protecting consumers from unfair interest rate hikes on existing balances, double-cycle billing and due-date gimmicks. This legislation is a central element of Congress’s long-range plan to protect consumers and bring meaningful reform to the financial system.

The Expedited Card Reform for Consumers Act, H.R. 3639, will move the effective dates of the following reforms up to the date the President signs the bill into law.

•  Prohibits arbitrary interest rate increases and universal default on existing balances;
• Prohibits issuers from charging over-limit fees unless the cardholder elects to allow the issuer to complete over-limit transactions, and also limits over-limit fees on electing cardholders;
• Requires payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest;
• Prohibits issuers from setting early morning deadlines for credit card payments;
• Prohibits interest charges on debt paid on time (double-cycle billing ban);
• Requires issuers extending credit to young consumers under the age of 21 to obtain an application that contains: the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt; or proof that the applicant has an independent means of repaying any credit extended;
• Protects recipients of gift cards by requiring all gift cards to have at least a five-year life span, and eliminates the practice of declining values and hidden fees for those cards not used within a reasonable period of time;
• Requires penalty fees to be reasonable and proportional to the omission or violation;
• Requires that creditors periodically review all interest rate increases since January 2009 and reduce rates when a review indicates that a reduction is warranted;
• Amends the Electronic Fund Transfer Act to limit dormancy, inactivity, and service fees associated with gift cards.

Became effective on August 20, 2009:

• Provide increased written notice to consumers of any increases in the interest rate or otherwise makes a significant change to the terms of a credit card account;
• Inform consumers of their right to cancel the card before the rate hike goes into effect;
• Send statements to consumers 21 days before the due date of any payments.