Thursday, May 21, 2009
The House yesterday gave final approval to a bill that will prohibit credit card companies from arbitrarily raising interest rates on existing balances and charging certain fees.
With a 361 to 64 vote, the House ensured that President Obama will be able to sign the bill into law by Memorial Day, as he requested.
The House had approved a more diluted credit card reform bill last month but chose to send a stronger Senate version to the president instead.
"These are important reforms to protect consumers and to bring some common-sense rationality into our financial system, and the president looks forward to signing it as quickly as possible," said White House spokesman Robert Gibbs.
The legislation approved yesterday, authored by Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), will prohibit card companies from raising interest rates on existing balances unless the borrower is at least 60 days late paying a bill. If the cardholder pays on time for the following six months, the company would have to restore the original rate. On cards with more than one interest rate, issuers will have to apply payments first to the debts with the highest rates. Before increasing rates on future purchases, the card company would have to give cardholders 45 days' notice.
Card executives have said the changes would prevent them from properly distinguishing between risky and non-risky borrowers and force them to charge everyone higher rates and annual fees.
Once Obama signs the bill as expected, it will take nine months to go into effect. It provides much stronger protections than new credit card regulations passed by the Federal Reserve in December. Those go into effect in July 2010.
-- Nancy Trejos