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House speeds up credit card reform
Wed Nov 4, 2009 /
Business
NEW YORK (CNNMoney.com) -- The House passed a bill Wednesday to move up the effective date for credit card reforms to Dec. 1, 2009, from from Feb. 22, 2010.
In May, President Obama signed into law a credit card reform act to crack down on the way issuers raise fees and interest rates. The reforms were scheduled to roll out in three parts over 12 months. "Just in time for the holidays, Congress can lock in a ban on interest rate hikes on existing balances, and the tricks that have kept far too many consumers trapped in a never-ending cycle of debt," said bill co-sponsor Rep. Carolyn Maloney (D-N.Y.), in a statement issued late last month. House Financial Services Committee Chairman Barney Frank (D-Mass.) was the other sponsor of the bill. The House passed the bill 331-92. The Senate will also have to vote to pass the bill in order for it to become law. Maloney said credit card companies "brought this on themselves" by taking advantage of the time between when the reform act was signed and when it would go into effect by pushing through even more rate and fee hikes. "This marks a step forward in bringing consumers badly-needed relief," Maloney said in the statement. The current schedule. The first portion of the reform act went into effect in August 2009, requiring banks to give 45 days notice on major changes to a contract, including rate hikes. Issuers must also give consumers 21 days notice before a bill comes due. Also, customers now have the right to reject changes to their contracts -- if they do so, they can pay off their balances at their existing rates within five years. The second part of the reform is currently slated to kick in Feb. 22, 2010. Major changes include prohibiting arbitrary rate increases on existing balances, and requiring that customers opt into the ability to overdraw their accounts. The third portion is scheduled for Aug. 22, 2010, and it calls for "reasonable and proportional" penalty fees, and would require that issuers review all interest rates and reduce them where warranted. If the Senate passes the expedited bill, the changes slated for February and August 2010 will become effective Dec. 1, 2009.
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