The majority of the provisions of the new law to protect credit card holders go into effect Feb. 22, 2010. Consumers have been hearing about the Credit CARD Act of 2009 since it was signed into law by President Barack Obama in May 2009, and many may have been hurt by higher interest rates, new fees and other actions taken by the industry since then.
Rep. Carolyn Maloney, D-N.Y., was co-sponsor of the Credit Cardholders’ Bill of Rights, which became law as the Credit CARD Act of 2009. Bankrate recently asked Congresswoman Maloney about the law, the industry’s reaction and her next battle in the financial services arena.
Getting the Credit CARD Act of 2009 passed was an achievement. Congratulations. Were there any reforms that you wanted that got left on the cutting room floor?
Well, I wish we had kept the 90-day implementation that was in the original bill. I think it would have prevented the last gasps of bad behavior from some in the industry.
The law restricted interest rate increases and required 45 days’ advance notice in most cases, but did nothing about credit limit reductions. Why were credit limit cuts not addressed?
The goal of the bill was transparency and notification in the credit card market — not regulation per se. Consumers needed to know what they’re getting into. But it’s always been true that if an issuer felt the ability to repay is at risk, they mitigate that risk in some way, often by cutting limits — especially during recessions. Credit cards aren’t a right; they’re a responsibility — for both sides.
Thinking about the gaps in protection, such as the exceptions to restrictions on interest rate hikes, how can consumers avoid running into credit card traps again?
Hopefully the new provisions in the law about notification of how long it will take to repay a card balance will help. But making sensible choices about credit is something that should be taught more in schools.
A lot of articles have been written about the Credit CARD Act. What misconceptions about the protections or loopholes have you come across?
Well, card issuers claimed that it was the end of the world. But amazingly, that hasn’t happened. I’m sure we’ll discover ways the law could be improved, and we’ll work on that. But I think a strong new Consumer Finance Protection Agency would help protect consumers, too, because even the best law needs a good cop on the street.
We know you were a proponent of enacting the legislation much sooner than Feb. 22. There has been a lot written about what the credit card issuers have done since the law passed — interest rates raised, new fees such as annual fees or fees for low-usage. What are your thoughts about this — did a lengthy implementation period enable all the account changes consumers are seeing?
Card issuers are learning to adapt and compete under the new rules, and clearly some issuers are taking advantage; there will always be bad actors in any industry. But once things kick in fully on Monday, I predict that card companies will adapt and consumers will appreciate the increased notice and ability to shop around for a new card with clear terms.
What’s next on the horizon of credit card legislation? Are there any other issues or practices in the banking/financial services area that you are looking into?
Well, I’m pushing for my Overdraft Protection Act, which would bring so-called overdraft “protection” plans under the Truth in Lending Act, require that banks get permission before being able to charge an overdraft fee, require that the fees be reasonable and proportional to the cost of the overdraft, and prohibit banks from manipulating the posting of transactions in a way that maximizes fees.