Senate Passes Credit Card Overhaul Bill

The Senate passed a bill Tuesday that would impose new restrictions on the credit card industry. It slows interest rate increases and places restrictions on penalty fees. It limits cards for minors. The House is on track to pass the bill as early as Wednesday and send it to President Obama.

Copyright © 2009 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

STEVE INSKEEP, host:

It's MORNING EDITION from NPR News. I'm Steve Inskeep.

RENEE MONTAGNE, host:

And I'm Renee Montagne.

Banks and financial institutions can often send off unfriendly regulations with the help of friendly lawmakers and powerful lobbyists. When it comes to credit cards, it looks like they've hit a wall. Congress is poised to pass a sweeping overhaul of the credit card industry as early as today. The bill would limit penalty fees and require advance notice for interest rate hikes. President Obama wants to sign it by Memorial Day. NPR's Audie Cornish reports.

AUDIE CORNISH: It's easy to see how the credit card measure gained momentum on Capitol Hill. Lawmakers have been swamped with consumer complaints for months. At the same time they've spent a lot of money rescuing the very companies that issue credit cards. Vermont Senator Bernie Sanders, an independent, summed it up.

Senator BERNIE SANDERS (Independent, Vermont): What adds insult to injury is that this is taking place at a time when we have put hundred of billions of dollars to bail out these financial institutions. At a time when they're getting zero interest loans from the Fed, their response to the American people is, thanks, chump, now we're going to raise your interest rates from seven percent to 30 percent.

CORNISH: Under the Senate bill passed yesterday, banks would have to wait 60 days before changing the rate on a late paying customer, and they'd be required to reinstate the old rate once the cardholder made payments on time for six months. Bank lobbyists like Scott Talbott fought hard against that last requirement.

Mr. SCOTT TALBOTT (Financial Services Roundtable): Credit cards are unsecured loans. There's no collateral backing them up like a home or a car. And so when your risk profile changes their credit terms change.

CORNISH: Talbott works with the Financial Services Roundtable.

Mr. TALBOTT: To an extent you limit that adjustment, the ability to be flexible, and you're going to limit the availability of credit or increase the price.

CORNISH: Banks say that means consumers can expect more cards with higher annual fees and fewer cards with low competitive rates. But Senate Banking Committee Chairman Christopher Dodd of Connecticut says he's not too worried because credit card companies still have to compete with each other.

Mr. CHRISTOPHER DODD (Democrat, Connecticut): Companies that go out and decide they're going to show the consumer by adding penalties, fees, and interest rate hikes I think do so at their own economic peril. I think there will be others out there who will take advantage of this, will offer cards and instruments that are going to be very appealing to consumers, and I welcome that.

CORNISH: The Senate bill does not ban penalty fees completely and it does not place a cap on interest rates. Republican Senator Richard Shelby, who helps craft the bill with Dodd, says that means banks haven't lost the tools they use to deal with cardholders who are credit risks.

Senator RICHARD SHELBY (Republican, Alabama): The Dodd-Shelby amendment before us allows card issuers to price risk. But requires that they consider both positive and negative changes in the consumer's risk profile when setting rates and terms. This means that consumers will pay more when their credit risk goes up and can have their rates reduced when it comes down.

CORNISH: The Senate measure, which passed 90-5, includes a controversial amendment to allow concealed weapons in national parks. The House bill has no gun provision. And House Democrats are trying to figure out a way to deal with the amendment and get the legislation to President Obama this week.

Audie Cornish, NPR News, the Capitol.

Copyright © 2009 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.