Currently, a credit card reform bill is making its way through Capital Hill as law makers attempt to stem the tide of consumer complaints against credit card companies. Having already passed through the House of Representatives (gaining 357 votes for the bill with only 70 votes against it), the popular bill entered the Senate floor nearly assured of success there.
As so often befalls popular bills, unrelated amendments have stalled the proposed bill which reached the floor of the Senate on Wednesday May 13th. Some of the credit card proposals within the original bill would:
- Ban interest rate hikes on existing balances unless a card holder was 60+ days behind, and then would require the rate to be restored to its previous level if payments were on time for six months.
- Consumers would have to be notified of rate increases 45 days in advance.
- Companies would not be allowed to charge late fees if they were late in processing a payment.
- Statements would have to be mailed 21 days before payment was due.
- It would be more difficult to provide cards to those under age 21.
- Rates on new accounts could not be increased within the first year, and promotional rates would have to be in force for at least six months.
- Ban companies from charging fees due to payment source (over the phone payments, for instance), charging interest on fees.
- Force companies to reveal the length of the payment schedule (based on minimum balance)
Ultimately, we support this bill (with the exception of differentiating adults that are between 18-21 years old) because it is attempting to make the credit card industry less complex so that consumers can better understand the terms of their debt. When the system is transparent and comprehensible, consumers can plan ahead concerning the amount of debt they wish to accumulate based on the terms offered. Consumers won’t have to worry about interest rates that change overnight without even doing anything wrong.
However, as this bill significantly changes the way in which credit card companies underwrite their loans, we expect the next 6-12 months to be a period of transition and as a result consumers can expect even more rate hikes, lowered limits, and less availability of credit.