The House and Senate are both working on bills to put limits on credit card companies. The Federal Reserve has created credit card regulations which are scheduled to go into effect July 2010. I’m listing some of the highlights below, and giving you enough info to google for details. I don’t know if any meaningful legislation will get passed or not. I hope so, because there are some good things in the bills, but I am concerned about what’s not in the bills.
There are no limits to interest rates. I’ve had a client – with a clean payment history – whose rate was raised from 12% to 38% one fine day. I don’t know how this can be justified with the prime rate in the low single digits. My client, who was able to handle the 12% rate was unable to handle 38%, in addition to the other credit card rate hikes. Guess what? He’s now looking into debt settlement and bankruptcy. Guess what else? He’s not the only one. I’m not into government dictating prices or rates, but rates in excess of prime +25% is ridiculous. I think there should be an interest rate ceiling tied to prime or some other index. Usury laws are not new, and I don’t understand why this is missing. Anyway, here are some highlights of what is included:
- Limits on over-limit fees
- Limits on how interest rates are allowed to rise, and how much notice is given when rates are increased
- Restrictions on deceptive marketing practices
- No cards to known minors who are not emancipated
- Payments applied to highest interest portion of balance
- Allow consumers to lower their credit limit
House Bill H.R. 627 is called the ‘Credit Cardholders’ Bill of Rights Act of 2009.’ It’s sponsored by Representatives Barney Frank and Carolyn Maloney.
Senate Bill S. 414 is called the ‘Credit Card Accountability, Responsibility and Disclosure Act. ‘It’s sponsored by Senator Christopher Dodd.
