Colorado senators back limits on credit-card rate hikes, practices
The U.S. Senate on Tuesday overwhelmingly approved a measure tightening rules on credit-card rate hikes and practices — legislation that U.S. Sen. Mark Udall of Colorado has pushed since his days in the House.
"It was a long road, but this [issue] has gained real salience in this tough economic time," Udall, a Democrat, said in an interview after the vote. "No one wants consumers to suffer any more that they have to."
Udall drafted a credit card reform bill in 2005 as a House member. The House passed a version of that bill by a 357-70 vote April 30.
The Senate's version — co-sponsored by Udall — is known as the "Credit Card Accountability, Responsibility and Disclosure Act" or "Credit CARD Act." The Senate approved it 90-5 Tuesday.
Wednesday, the House voted 367-61 to approve the Senate version of the bill and send it on to President Barack Obama, who has said he wants to sign the bill before Memorial Day.
In the interview, Udall described the legislation as an attempt to bring "fairness and common sense" to the credit card business.
Udall, who was elected to the Senate last November, said he began pursuing the credit-card reform issue in the House four years ago "when I began to hear from people of all stripes and backgrounds that they weren't being treated fairly by their credit card company. You can't really go very far down the street without hearing a story about this hitting people pretty hard."
Colorado's other U.S. senator, Democrat Michael Bennet, also supported the measure.
"As I traveled across the state [recently], I heard from people who are being forced to absorb double-digit rate increases despite having paid all their bills on time," Bennet said in April when the House bill was approaching a vote. "It’s time we rein in these abusive practices and create a new set of rules that protect American consumers without impeding the flow of credit to families and small businesses."
Under the bill, credit-card companies would have to take several steps, including posting their credit rules on the Internet and giving cardholders a written statement explaining pending interest-rate hikes 45 days in advance.
Credit-card companies wouldn't be able to increase interest rates on existing balances except in limited circumstances, such as the expiration of a promotional rate or failure by a customer to make a payment within 30 days of the due date.
The bill includes other restrictions on credit-card practices, including a ban on charging interest on balances that already had been paid and a prohibition on issuing cards to children.
Business groups were not in agreement about the bill.
The National Federation of Independent Business and the National Small Business Association have backed it, but the Small Business & Entrepreneurship Council said the bill will, in effect, impose price controls on the credit-card industry, which would lead to tighter credit at a time when the economy is struggling.
U.S. Rep. Jeb Hensarling, R-Texas, said the legislation will lead to higher interest rates and fees for credit-card users who pay their bills on time because it limits the ability of credit-card companies to use risk-based pricing.
“This bill will take us back to a previous era, a bygone era where everybody paid higher interest rates, where a third fewer people had access to credit, and we had all of these dreaded annual card fees,” Hensarling said.
Udall said he disagreed with those concerns, and noted that the bill received strong bipartisan support.
"I think it's very telling that the small-business sector thinks there should be [credit card] reform as well," he said.
NFIB and NSBA supported the bill because many of their members, such as NSBA’s McMillon, feel they have been treated unfairly by their credit-card companies.
“Our members are troubled by some of the business practices utilized by card companies,” said Susan Eckerly, NFIB’s senior vice president for public policy.
Source-:bizjournals.com
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