Senate Panel Approves Credit Card Restrictions
It seems that someone is finally paying attention to the credit card crisis… and actually doing something about it.
On March 31st, a Senate panel approved a measure with new restrictions on credit card interest rates. The bill, known as the Credit Card Accountability, Responsibility and Disclosure Act, proposes broader restrictions than the ones adopted by the Federal Reserve in December.
Who Approves
The measure passed on a 12-11 vote, with Democrats and Republicans split right down the middle. Democrats supported the bill, citing that banks are using lax rules to “gouge” consumers. “The list of troubling credit card practices is as lengthy as it is disturbing,” said Senate Banking Committee Chairman Christopher Dodd (D). “We got ourselves into a lot of trouble in this country because of a lack of underwriting standards.”
Who Disapproves
For their part, Republicans completely shut out the bill, worried that the new legislation would reduce consumer’s access to credit. Senator Richard Shelby, the panel’s senior Republican, said lawmakers hadn’t fully examined the bill.
Credit companies are also objecting the bill. “There is certainly a heightened concern over the impact of business practices,” said Ken Clayton, American Bankers Association senior vice president of card policy. “It may be more negative than positive.”
The Changes
The most noteworthy changes to the legislation include: prohibiting banks from charging interest on fees (such as late payment and exceeding credit limit fees); requiring credit card companies to disclose how long it would take to pay off a balance when making the minimum monthly payment; and requiring companies to send statements 21 days in advance, as opposed to 14 days. The act would also require the signature of a parent when the borrower is under 21 years of age, unless there is proof of an independent income or having previously taken a financial education course.
The bill now proceeds to a full Senate vote. Parties on both sides will have to wait and see…
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[...] the executives of major credit card companies last week to discuss a solution. In the same week, a Senate panel approved a bill to limit harmful credit card practices. (link to related internal [...]