Lawmakers discuss even more credit card industry regulations…
With credit card account default rates at all time highs, Congress has once again taken up the issue of unfair credit card practices and is considering new dramatic consumer protections. The Senate Banking Committee was particularly hard on the credit card industry when discussing hidden fees imposed on unsuspecting consumers, including those incurred for telephone payments, balance transfers, cash advances and replacing lost credit cards. “The list of questionable actions credit card companies are engaged in is lengthy and disturbing,” said Sen. Chris Dodd, D-Conn., chair of the banking committee.
Any new regulations will be in addition to rules adopted by the Federal Reserve last year, which take effect in 2010 and shield consumers from arbitrary interest rate hikes and inadequate time to make a payment. In addition, before any changes can be made to an account, consumers must be given 45 days notice. (Currently as little as 15 days is given)
The new proposed legislation by Sen. Dodd and Sen. Carl Levin, D-Mich. would:
- Prohibit companies from charging consumers to make payments by phone or mail
- Prohibit interest charges on penalty fees
- Require companies to lower penalty rates, if no further violations occur after six months
- Co-signer required for cards issued to anyone under 21 years of age.
But given the reforms already adopted in December, some at the hearing Thursday urged caution in imposing additional regulations. “We need to be careful not to take action that would limit credit,” said Sen. Richard Shelby, R-Ala. Kenneth J. Clayton, general counsel for the American Bankers Association, said in a statement that it’s not yet clear what impact the new rules will have. “It is clear that they broadly expand protections for consumers. What is less clear is how they will affect the willingness of investors to fund credit card loans, the ability of lenders to make loans and more broadly, the impact the rules will have on the American economy,” Clayton said in a statement.
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