WASHINGTON -- President Barack Obama signed the Credit Card Accountability, Responsibility, & Disclosure (CARD) Act of 2009 on Friday, "marking a turning point for American consumers and ending the days of unfair rate hikes and hidden fees," said the White House. The CARD Act bans unfair rate increases, prevents unfair fee traps and requires "plain sight/plain language" disclosures, accountability and protections for students and young people. (Click [image-nocss] here to view the White House press statement, including details of the legislation. Also,click here to view video of the President signing the legislation into law.)
Meanwhile, Senator Chris Dodd (D-Conn.), the Chairman of the Senate Committee on Banking, Housing & Urban Affairs, who led the reform effort in the Senate, said in a conference call with reporters on Friday that there are still two major issues that remain unfinished business: a cap on interest rates and limits on fees that merchants pay when a customer uses a credit card for a purchase.
According to a report in The Hartford Courant, Dodd (pictured) said it was outrageous that a credit company could charge more than 30% interest on purchases. It was equally appalling, he said, that big credit card companies make so much money from small store owners and other entrepreneurs who have to fork over a portion of their profits when customers pay with credit cards. "And we've got to do something about it," he said.
The Senate rejected a proposal to cap interest rates at 15% amid intense lobbying by the banking industry and worries by some lawmakers that the cap would kill the broader credit-card overhaul package.
Dodd has asked that the Federal Reserve conduct an analysis to determine how Congress could rein in interest rates. A similar study on interchange fees will be conducted by the Government Accountability Office (GAO). The fees, typically 2% to 3% of each transaction, are paid by the merchant so they can accept major credit cards and have those transactions processed through banks.
Since 2001, the fees have tripled, from $16 billion to $48 billion last year, according to a report in The Palm Beach Post. Customers eventually pay the bill in higher prices, said the report. The Merchants Payments Coalition, a group of convenience stores, retailers and small-business owners, the fees on average cost Americans more than $2 out of every $100 they spend in stores, or an estimated $427 a year per household.
An amendment to the credit card reform legislation, proposed by Sens. Richard Durbin (D-Ill.), and Kit Bond (R-Mo.), would have provided some relief but failed to make it into the final bill signed by the President. It would have added debit cards to the payment methods merchants can offer a discount for and would have prohibited the credit card issuers from doing anything to interfere with such discounts, said the report.
J. Craig Shearman, spokesperson for the National Retail Federation (NRF), told the newspaper that federal law allows merchants to offer a discount to customers paying by cash or check, but contracts with Visa and Master Card are written in such a way that the discounts are rarely done.
The amendment would have allowed the discounts to be given at checkout. "Supposedly, they will continue to address it. There is still hope," Jim Smith, president and CEO of the Florida Petroleum Marketers & Convenience Store Association, told the paper. But, he added, "Glaciers move faster than Washington."
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