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Senate seeks credit card bill to safeguard consumers

Senate seeks credit card bill to safeguard consumers
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First Published: Fri, Mar 27 2009. 12 57 PM IST
Updated: Fri, Mar 27 2009. 12 57 PM IST
Washington: Key congressional panels are set to meet next week to discuss credit card legislation aimed at cleaning up unfair and deceptive practices that have slapped consumers with unexpected fees and rate hikes.
The US Senate Banking Committee will meet on 31 March to consider pro-consumer credit card legislation, sources with direct knowledge of the plan told Reuters on Thursday.
In the US House of Representatives, a Financial Services subcommittee is planning to consider credit card legislation on 1 April, a committee aide said earlier this week.
Credit card reform has broad support in the House, which is firmly controlled by Democrats, but support for reforms is less clear in the closely divided Senate.
The sources spoke on condition of anonymity because they were not authorized to speak publicly.
The Senate Banking Committee session will consider a bill introduced earlier this year by Senate banking committee chairman Christopher Dodd, a Connecticut Democrat.
Next week’s sessions will represent big victories for consumer groups who for years have been urging lawmakers to rein in card companies.
Reforms also are likely to result in lower revenues for credit card issuers who already are suffering from the financial crisis and indicate a weakened state of the powerful banking lobbying efforts.
“The credit card companies have brought this on themselves,” said Ed Mierzwinski, consumer advocate with the US Public Interest Research Group.
Stronger than Fed rules
The Federal Reserve in December adopted rules to clean up what chairman Ben Bernanke called unfair and deceptive practices by the industry.
The rules prohibit certain billing practices using balances in previous monthly statements, give card holders more notice when their interest rates will increase and provide clearer disclosures.
Dodd’s bill would prohibit the same practices, but consumer groups considered it stronger and more comprehensive than the Fed rules and other legislative proposals.
For example, his bill would prohibit solicitations to individuals under the age of 21 without parental or guardian consent and prevent a card company from unilaterally changing the terms, a provision called “any-time, any reason.”
It also calls on the Government Accountability Office, a congressional audit group, to study the effects of so-called interchange fees on consumers and merchants.
Interchange fees are the cost for transacting purchases using an electronic payment system operated by Visa Inc and MasterCard Inc. In the House, the Judiciary Committee has been examining the issue.
The Fed also gave the industry until 1 July, 2010, to implement the new practices, drawing complaints from irate consumer groups and some lawmakers.
The House bill, introduced by Rep Carolyn Maloney, a New York Democrat, would force credit card issuers to clean up their practices 90 days after a bill is signed into law.
During a speech to the Women in Housing and Finance group of financial professionals, Maloney said on Thursday that her bill could allow for some practices to be implemented on the Fed’s timetable, but not all.
She did not specify which practices could be implemented later, but the industry has complained time is needed to train staff, develop new risk models and software, and work with vendors on printing new disclosures.
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First Published: Fri, Mar 27 2009. 12 57 PM IST
More Topics: Financial | Credit Cards | Legislation | Bill | Senate |