Credit Card Overhaul Bill Sent To Obama

Lawmakers on Capitol Hill have sent President Obama a bill that would rein in credit card fees and interest rates, while allowing gun owners to carry concealed weapons in national parks. The Senate passed the measure Tuesday. The House acted on Wednesday.

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The United States Congress has moved to protect both your money and your right to carry a gun. They tackled both issues at the same time. And the way they did it tells you a lot about who's got influence in Washington right now. We heard on this program earlier this week that the gun lobby is on a roll. That continued when lawmakers voted to let licensed gun owners carry loaded weapons in national parks. They attached the measure to an unrelated plan, a so-called credit card holder's bill of rights. And that measure too passed over the protest of the banking industry.

Here's NPR's Audie Cornish.

AUDIE CORNISH: The measure to reign in credit card companies stops them from charging interest on debt that's already been paid, or from retroactively raising interest fees on outstanding balances, or from imposing excessive penalty fees. Bill sponsor and New York Democrat Carolyn Maloney says these sorts of practices had consumers backing the bill in droves.

Representative CAROLYN MALONEY (Democrat, New York): It got to the point where I literally could not walk down the street, go to the supermarket or ride the subway, or even go to the floor of Congress where I was not told about interest rates being hiked, even when consumers were playing by the rules.

CORNISH: Over the objections of banks and financial institutions, the Senate added more aggressive regulations. For instance, card issuers won't be able to raise the interest rate on late-paying customers for at least 60 days. But Senate lawmakers also attached an amendment that would allow loaded and concealed weapons in national parks. House legislators who support gun control were quick to register their dismay.

Representative RUSH HOLT (Democrat, New Jersey): To say that this amendment about guns in the park is out of left field insults the many ballplayers who over the years have held that position.

Representative MAXINE WATERS (Democrat, California): We're trying to protect consumers against the practices of these credit card companies that have been ripping them off for so long. And here we have this irrelevant amendment.

Representative SAM FARR (Democrat, California): This is a dumb amendment and Congress should be embarrassed that we've to vote on it.

CORNISH: That was Rush Holt of New Jersey and Maxine Waters and Sam Farr of California - all Democrats. They weighed in when House leaders decided there was only one way to get the Senate bill through the House. They split it in two and held separate votes - one for the credit card legislation and another on the gun amendment. Gun rights supporter such as Texas Republican Jeb Hensarling sounded more than a little pleased with the opportunity.

Representative JEB HENSARLING (Republican, Texas): I don't know how these two particular issues managed to get co-mingled. Having said that, I can't think of any bad time to stand up for the Second Amendment rights of our citizenry.

CORNISH: Currently visitors to national parks must keep weapons unloaded and stored under Interior Department regulations. The gun amendment would let people carry them where state laws allow. It was sponsored by Oklahoma Senator Tom Coburn, who seized an opportunity during last week's Senate debate to attach it to the popular credit card bill.

Senator TOM COBURN (Republican, Oklahoma): So the whole purpose of this amendment isn't a gotcha amendment, it's to say: does the Second Amendment mean something? Do states' rights mean anything? And should we have bureaucrats limiting individual rights?

CORNISH: What frustrates gun control supporters like Congresswoman Carolyn McCarthy of New York is that many of her newer, more moderate Democratic colleagues agree with Coburn.

Representative CAROLYN MCCARTHY (Democratic, New York): For me to be here in a Democratic House with a Democratic leader, we have a Democratic Senate and a Democratic president, and we're just letting these gun bills go through.

CORNISH: Many lawmakers said they didn't want to put sweeping new protections for the credit card holders in jeopardy by dwelling on the gun provision. House Financial Services Chairman Barney Frank.

Representative BARNEY FRANK (Democrat, Massachusetts): I disagree with the gun amendment. I wish it hadn't been in there. I don't control the rules in the Senate. I intend to vote against it. In my judgment the value of the credit card bill outweighs the harm that I think that would do.

CORNISH: So the House passed the two measures in separate votes and yoked them together for the president's desk. The credit card legislation goes into effect nine months from enactment. Mr. Obama is planning to sign the bill - guns and all - in the next few days.

Audie Cornish, NPR News, the Capitol.

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Q&A: Credit Card Reform

Congress passed legislation that will overhaul the credit card industry by placing new restrictions on interest rate hikes and penalty fees that consumers face.

The Senate passed the bill on Tuesday and the House followed suit on Wednesday. President Obama has said he'd like to sign it into law before Memorial Day.

Here, a look at how some of these changes will affect consumers.

What impact will this legislation have on credit card interest rates?

The legislation will prevent arbitrary interest rate hikes by credit card companies.

Banks will have to wait 60 days before raising the rate on late-paying customers, and they will be required to reinstate the old rate once the cardholder makes payments on time for six months.

The legislation will also prevent companies from raising the interest rate on any outstanding credit card debt consumers have if they are late paying bills for other credit cards they might use. And it will require credit card companies that choose to increase interest rates to periodically review and lower them if the review warrants it.

For new credit card customers, the legislation will also prevent issuers from increasing rates in the first year after the account is opened.

Many banks already offer cards that comply with some of the rules contained in the legislation.

How about the fees that credit card companies charge?

Credit card fees have long been a thorn in the side of consumers. The legislation will prevent issuers from charging a fee to pay off credit card debt by mail, telephone or electronic transfer, except when it requires someone's help to expedite the payment. It will also require penalty fees to be "reasonable and proportional" to the violation.

What about all the credit card terms and conditions?

The legislation requires credit card holders to receive 45 days' notice for any interest rate, fee or finance charge increases. Issuers will also have to post on the Internet the terms of their credit card agreements (some banks already do this).

The 45-day notice and some other parts of the legislation are already scheduled to take effect in July 2010 as part of Federal Reserve regulations. Any legislation, however, will place further limits on fees and on those eligible to obtain a credit card.

The legislation aims to protect people under 21. How will that work?

Young people who are new to the concept of credit cards can quickly find themselves in a pile of debt. The legislation aims to protect people under 21 by requiring the signature of a parent or guardian who will take financial responsibility for the debt. Alternatively, those under 21 could obtain a credit card without a parent's signature as long as they are able to show they have the financial means to repay any balances they might carry on the card.

College students are often lured by the promise of credit cards. The legislation will bolster protection for these students against aggressive credit card marketing and provide more clarity about deals that have been made between credit card issuers and universities.

Are there any benefits for people who pay their credit cards on time?

Yes. The legislation will ban double-cycle billing, under which issuers apply interest to a balance that has already been paid.

It will also require that payments made at local bank branches be credited the same day. And it will prohibit late fees if the issuer delayed crediting any payment.

How soon will these changes take effect?

The requirement that the credit card industry notify cardholders of an interest rate increase will go into effect 90 days after the legislation is enacted. The industry will have nine months to make all the other changes.

Who will police the credit card companies?

The Federal Reserve Board will be the main agency reviewing the practices of the industry and the terms of credit card agreements they make available to consumers. Credit card issuers are also subject to regulation by other state and federal agencies.

How has the financial services industry reacted to this?

Edward Yingling, president of the American Bankers Association, said Tuesday that some of the provisions will "undermine the availability of credit," adding that the legislation would change the "entire business model of credit cards by restricting the ability to price credit for risk."

Banks say consumers can expect more cards with higher annual fees and fewer cards with low competitive rates if this legislation is enacted.

"Credit cards are unsecured loans. There is no collateral backing them up like a home or a car and so when your risk profile changes, their credit terms change," says Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, an industry group. "To the extent that you limit that adjustment — the ability to be flexible — then you're going to limit the availability of credit or increase the price."

With reporting by NPR's Joshua Brockman, Audie Cornish and The Associated Press

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