Dennis Seid 3/31/09
Congress considers credit card limits
* Critics say the move would lead to even higher consumer costs.
The Associated Press
WASHINGTON – Democrats in Congress are taking a swipe at credit card issuers and their increasingly creative reasons for raising fees on strapped consumers, sparking a well-financed duel over how to crack down on alleged abuses.
Striking the right balance between getting credit moving again and protecting consumers who depend on it is a long and complex process and nowhere near complete. But lawmakers were hoping to advance consumer-friendly legislation before they head home for Easter at the end of the week and face their constituents – 12.5 million of whom are out of work.
“Right before this break coming up I thought it was a good time to try to deal with it, get it done,” said Senate Banking Committee Chairman Christopher Dodd, D-Conn.
His panel led the way Tuesday by narrowly voting to send the full Senate a bill that would ban some of the many reasons credit card issuers raise interest rates and fees on consumers, raising the hackles of industry advocates who say such limits would ultimately cost consumers more money.
“Making this credit available is a very risky business and the committee’s action today will unfortunately make it harder, not easier, for banks to continue doing so,” said American Bankers Association’s Kenneth J. Clayton.
The answer, according to some Republicans, is prosecuting predatory lenders and requiring issuers to more fully disclose agreements in language that consumers can easily understand. They point out that new rules by the Federal Reserve, designed to accomplish some of the same goals, take effect next year without punishing an industry suffering from the recession or putting credit out of reach for higher-risk borrowers.
Dodd’s bill – similar to the House measure to be considered today – would force the industry to comply this year with some of the same rules approved by the Fed now slated to take effect in 2010.
Dodd’s proposal, approved by the panel 12-11 on Tuesday, would bar so-called double-cycle billing, when a card issuer computes interest charges on outstanding balances from more than one billing cycle. It also would ban “universal default,” the practice of raising a cardholder’s interest rates when that consumer has problems paying other creditors. And it would prevent card issuers from changing the terms of a contract as long as the card holder pays on time.