WASHINGTON – Responding to anger and frustration from consumers and a push from President Barack Obama, the House of Representatives on Thursday passed sweeping legislation to shield consumers from sudden credit card rate increases.
By a 357-70 vote, lawmakers approved the “Credit Cardholders Bill of Rights Act of 2009,” a detailed list of safeguards for consumers who feel battered by recent industry practices.
“This bill will bar some of the more outrageous abuses,” said Rep. Carolyn Maloney, D-N.Y., who’s been trying for years to get the bill passed.
The bill, which got support from 252 Democrats and 105 Republicans and now moves to the Senate for a vote, includes provisions that:
•Bar retroactive rate increases on existing balances except for those more than 30 days late in payments.
•Require creditors to give consumers a written notice of any rate increase at least 45 days in advance. This provision would become law 90 days after the bill is signed.
•Prohibit double cycle billing, a practice that allows companies to charge interest on debt consumers carrying a balance forward have already paid on time. Like most other provisions, this part would go into effect a year after enactment.
•Require creditors to send out billing statements at least 21 days before the due date, up from the current 14.
•Bar creditors from issuing cards to most people under 18.
Maloney’s effort this year got help from two important sources: Obama and reports about credit card practices during the recession.
Obama made it clear he wanted the changes, calling credit card executives to the White House last week and reiterating his support for the measure at his prime-time news conference Wednesday.
Maloney’s effort was also aided by increasing constituent ire.
A survey of the dozen largest card issuers by the Pew Health Group Safe Credit Cards Project found 93 percent of cards “allowed the issuer to raise any interest rate at any time by changing the account agreement.”
And, it said, some 87 percent of cards “allowed the issuer to impose automatic penalty interest rate increases on all balances, even if the account is not 30 days or more past due. The median allowable penalty interest rate was 27.99 percent per year.”
A Senate version of the bill is expected to be considered soon, possibly next week.