Congressman Barney Frank
Representing Massachusetts' 4th District

House Votes to Speed Up Credit Card Reforms
Frank Debates Republican Colleagues
November 4, 2009

Washington, DC – The House of Representatives today voted to approve legislation which would push up the effective date of credit cards reform, which had been scheduled for next year.  The new bill would make the reforms effective immediately upon the signing of the bill by the President.

Last April, the House passed legislation to clamp down on abusive practices by credit card companies, including retroactive changes in interest rates, excessive fees and penalties, short payment windows, and other practices.  The legislation, known in the House as the Credit Cardholders Bill of Rights, had been introduced by Congresswoman Carolyn Maloney of New York, and it was moved through the Financial Services under the leadership of Chairman Barney Frank.  On May 22nd, President Barack Obama signed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 into law.  (See video and transcript)

The original legislation was to be phased in by three staged dates – August 2009, February, 2010 and August, 2010.  In recent months, some credit card companies have taken advantage of the time schedule for implementation by significantly increasing rates on cardholders.  Congressman Frank and his colleagues on the Financial Services Committee took swift action and brought a bill that would speed the date of enactment of the earlier legislation.

In April, Congressman Frank stated that “if the banks, the credit card issuers, use the time between now and the effective date in a way that is abusive of customers, if they use the time not simply to get ready for the change which they say they need but if they use the interim period to raise rates on people retroactively and to do other things that are abusive, to me that will be a very strong argument for speeding up the date.”

Today, he made good on that threat by helping move a bill through Congress that will speed up the date for enactment of the credit card bill.

In a speech on the House floor (see video), Frank sharply criticized credit card companies for attempting to “retain the right unilaterally and retroactively to raise the interest rate on what you already own them.  It is the single unfairest economic transaction I can think of that doesn't involve a pistol.”

Today’s vote, which came at 3:25 PM, followed almost four hours of debate on the bill.  Republicans argued that the legislation would pressure credit card companies into raising rates on individuals and small businesses.  Frank silenced his Republicans colleagues by reading a letter by the National Federation of Small Business, which strongly supported the original bill.  Republicans also spoke at length about their opposition to health care reform which will not come to the House floor for several days.

In the end, the bill passed the House with strong support, 331-92.  Eighty-three Republicans joined almost every Democrat in voting for the bill; ninety one Republicans remained opposed.

The bill now goes to the Senate, where Senator Mark Udall (D-CO) has introduced companion legislation.  Senator Christopher Dodd (D-CT), Chair of the Senate Banking Committee, has also introduced a separate bill requiring an immediate moratorium on retroactive rate increases.

 

THE FOLLOWING INFORMATION IS COURTESY OF THE FINANCIAL SERVICES COMMITTEE

The provisions which will take effect immediately upon enactment of the bill include:

• Prohibits arbitrary interest rate increases and universal default on existing balances;
• Prohibits issuers from charging over-limit fees unless the cardholder elects to allow the issuer to complete over-limit transactions, and also limits over-limit fees on electing cardholders;
• Requires payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest;
• Prohibits issuers from setting early morning deadlines for credit card payments;
• Prohibits interest charges on debt paid on time (double-cycle billing ban);
• Requires issuers extending credit to young consumers under the age of 21 to obtain an application that contains: the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt; or proof that the applicant has an independent means of repaying any credit extended;
• Requires penalty fees to be reasonable and proportional to the omission or violation.
• Requires that creditors periodically review all interest rate increases since January 2009 and reduce rates when a review indicates that a reduction is warranted.

These provisions already took effect last August 20th:

• Provide increased written notice to consumers of any increases in the interest rate or otherwise makes a significant change to the terms of a credit card account;
• Inform consumers of their right to cancel the card before the rate hike goes into effect;
• Send statements to consumers 21 days before the due date of any payments.

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