Further Legislation to Cut Interest Rates
Even more proposed restrictions on credit card issuers…
Ignoring threats by the banking industry that further legislation will stymie consumer credit, Senate Democrats moved to limit credit card interest rates with new restrictions that are broader than those adopted by the Federal Reserve in December. In addition to prohibiting interest charges on late payments or for exceeding credit limits, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 would require card issuers to disclose how long it will take to pay off a balance if only the minimum monthly payment is made and that statements be mailed at least 21 days before the payment due date. The Senate legislation includes protections specifically for consumers under 21 years of age and now moves to the full Senate to be implemented within nine months of enactment.
The proposal also increases the borrowing ability of regulators, the FDIC and National Credit Union Administration to deal with potential bank failures. The provisions, introduced by Senator Mike Crapo(R-Idaho) would increase the FDIC’s borrowing ability to $100 billion (from $30 billion) for banks and the NCUA’s limit to $6 billion (from $100 million) for credit unions.
Meanwhile, a U.S. House of Representatives Financial Services subcommittee is planning similar legislation. The House version, HR 627, would put the force of law behind some of the rules that federal banking regulators approved in December. Among some of the other rules:
* Prohibiting advertising a rate as “fixed,” unless the rate truly is not subject to change either for a clearly disclosed period or for the life of the plan.
* Requiring that cut-off times for receipt of mailed payments on the due date be reasonable, with a safe harbor for a cut-off time of 5 p.m. or later.
* Requiring a creditor that does not accept mailed payments on a Sunday or holiday due date to treat a payment received the next business day as on time.
The American Banker’s Association attacked the Senate bill, saying it had “deep concerns that the legislation passed by the committee will harm consumers and the economy at the very time our country can least afford it.” Critics warn that access to credit will be hampered if issuers can’t properly price the risk and industry experts said there could be unintended and negative impacts on consumers. The banking industry disputes that the rules of HR 627 are needed. “This measure, which instead attempts to prohibit specific practices, imposes additional costs and burdens on community bankers who did not contribute to the problems in the industry, and will result in fewer and more expensive sources of credit for all Americans.”
* Keep up with credit industry news on our Credit Card Blog >
