Tuesday, Oct. 27
Posted 8 a.m. EST
Bankrate reporter Leslie McFadden contributed this entry.
Yesterday, Sen. Christopher Dodd, D-Conn., who authored the Credit CARD Act of 2009, introduced a bill that would immediately freeze interest rates on existing balances. The CARD Act became law in May but most of the provisions don't take effect until February.
From his press release:
"We worked long and hard to enact the safeguards included in the Credit CARD Act," said Dodd, who had introduced the bill in 2004, 2005 and 2008 before successfully passing it this spring. "But as soon as it was signed into law, credit card companies were looking for ways to get around the protections this Congress and the American people demanded. This bill would end those abuses and further protect customers today."
"At a time when families are struggling to make ends meet, jacked-up rates can quickly create crushing debt. People need to be responsible with their money, but they shouldn't be taken to the cleaners by outrageous rates."
House panel approves billLast week, the House Financial Services Committee approved legislation that would expedite the implementation date for the remaining provisions of the CARD Act to Dec. 1.
The new bill doesn't add any new protections to the plethora that consumers will receive next year, such as fairer payment allocation and rate hike restrictions. It simply pushes up the compliance date.
Federal Reserve Chairman Ben Bernanke argued against moving up the deadline, and said in a letter last week that issuers need time to "allow for an orderly transition and to avoid unintended consequences, compliance difficulties and potential liabilities."
Rep. Carolyn Maloney, D-N.Y., who co-sponsored the House bill, praised its advancement on her Web site. "The card companies brought this on themselves, by using the time between when the bill was signed by President Obama and when it goes into effect to 'get in under the wire' with a last gasp of unfair practices," she said in a statement. "Today's action shows Congress can act with speed when necessary to provide consumers the protection they need."
About 45 percent of consumers have seen a negative change to their terms, such as rate or fee increases, according to a Credit.com survey conducted in October. The same survey also found that 56 percent of consumers want the law to take effect in December.
If the law does kick in this year, consumers could charge their holiday purchases without fear that the rate on the balance would increase. The law prevents rate hikes on existing balances except in limited circumstances, such as promotional rate expiration or 60-day delinquency. With 45-days' notice, however, credit card providers can change the APR and apply it to new transactions.
The accelerated effective date would not apply to issuers with less than two million cardholder accounts, or to gift card provisions included in the original CARD Act. In both cases, the Feb. 22 implementation date applies.
Your thoughtsReaders, do you care if the majority of the CARD Act provisions go into effect two months sooner than scheduled? Would it make any difference to you if a rate freeze was imposed?
On a separate topic, I'd like to hear from you if your credit card offers tools or features to help you manage debt or spending. Which services do you like or dislike? Your comments may be used in an upcoming article. E-mail me at email@example.com.
Read all of the Plastic Rap blog entries.