The legislation does not include a provision to regulate interchange fees, but maintained an amendment ordering further study of the interchange [image-nocss] issue, reported Credit Union Times, which represents, along with banks and the credit-card companies, the opposite side of the issue from retailers, who want to see the fees mitigated and made more transparent. (Click here for previous CSP Daily News coverage.)
If this consumer legislation is enacted, the credit-card industry would have nine months to change the way it does business: Lenders would have to post their credit-card agreements on the Internet and let customers pay their bills online or by phone without an added fee. They would also have to give consumers a chance to spare themselves from over-the-limit fees and provide 45 days notice and an explanation before interest rates are increased.
Some of these changes are already on track to take effect in July 2010, under new rules being imposed by the Federal Reserve. But the Senate bill would put the changes into law and go further in restricting the types of bank fees and who can get a card. For example, the Senate bill requires those under 21 who seek a credit card to prove first that they can repay the money or that a parent or guardian is willing to pay off their debt if they default.
The legislation would not cap interest rates as some lawmakers had hoped. It also would not prevent lenders from finding new ways to drain customers' bank accounts or keep consumers from spending money they don't have. But it would give spenders more flexibility and outlaw many of the surprise costs associated with credit cards at a time when money is tight in most households. For example, under the bill, a cardholder would have to opt to be allowed to go over a credit limit. If customers don't agree and the bank authorizes a charge that would push them over their limit, the lender could not levy an over-limit fee.
Another boon for consumers is limiting a practice known as "universal default," when a lender sharply increases a cardholder's interest rate on an existing balance because the customer is late paying that bill or other, unrelated bills. Under the new legislation, a customer would have to be more than 60 days behind on a payment before seeing a rate increase on an existing balance.
Even then, the credit card company would be required to restore the previous, lower rate after six months if the cardholder pays the minimum balance on time.
The banking industry opposed the overall measure and said it could restrict credit at a time when Americans need it most. Banking officials defended their existing interest rates and fees on grounds that their businesslending money to consumers with no collateral and little more than a promise to pay it backis very risky.
In other legislative news, the Senate Health Education Labor & Pensions Committee yesterday held an executive session on the Family Smoking Prevention & Tobacco Control Act (S. 982), which would grant the U.S. Food & Drug Administration (FDA) the authority to regulate tobacco. Meanwhile, the Senate on Monday unanimously confirmed Dr. Margaret Hamburg, who has voiced her support for this proposal, as the head of the FDA.
Click here to read the statement of committee chairman Edward Kennedy (D-Mass.) in favor of the legislation.Click here to read the statement of ranking Republican Michael Enzi (R-Wyo.) in opposition to the legislation.
Andclick here to view video of the session.
Click herefor previous CSP Daily News coverage.
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