Senate Passes Its Version Of Credit Card Bill
MELISSA BLOCK, host:
President Obama may soon be able to put his signature on legislation that affects everyone who owns a credit card. Today, the Senate passed legislation to limit penalty fees on credit cards, and bans surprise interest rate hikes. The vote was 90 to five.
As NPR's Audie Cornish reports, the irony is that the legislation could end up costing more for credit card holders who always pay their bills on time.
AUDIE CORNISH: Like the House version, the Senate bill requires card companies to mail their billing statements at least 21 days before a payment is due. It establishes official definitions for terms, like fixed rate and prime rate, so consumers can't be misled. And both bills try to shield teens from credit card offers. But the Senate version goes further.
Banking Committee chairman Chris Dodd of Connecticut was the bill's primary sponsor.
Senator CHRISTOPHER DODD (Chairman, Senate Banking Committee; Democrat, Connecticut): At a time when jobs are being lost, homes are being foreclosed, retirement accounts are being eroded, to have the industry reach in and be as abusive, in my language, to consumers needed to stop and needed to change.
CORNISH: The Senate bill would prevent companies from charging fees for customers who exceed their credit limits unless a customer gives permission to cover over-the-limit purchases. It requires promotional interest rates to last six months, and bars card issuers from changing the rate on a customer in the first year of a new account.
New York Senator Charles Schumer says just making credit card contracts easier for consumers to understand is no longer enough.
Senator CHARLES SCHUMER (Democrat, New York): People like myself, who defended disclosure as all that was necessary, now have come to the conclusion that because the credit card companies will do everything to jack up those rates and make profits when they're losing so much money in other areas - that we need to do more.
CORNISH: Banks said they welcome some of the legislation. What really bothers them is that the bill forces them to wait until a customer is 60 days late on a payment before they can charge a higher interest rate.
Mr. SCOTT TALBOT (Senior Vice President for Government Affairs, Financial Services Roundtable): This is a fundamental change in sort of credit policy in America.
CORNISH: Scott Talbot is with the Financial Services Roundtable.
Mr. TALBOT: The bill that the Senate's dealing with will restrict the ability of a credit card company to tailor credit terms to each individual borrower. So as a result, what you'll see is everyone paying sort of a uniform price. Some won't be able to get credit, and others will pay more.
CORNISH: Talbot says the legislation will bring an end to promotional interest rates, the return of annual fees, and higher rates for everyone. He says that will constrict credit just as people are trying to get through the economic downturn.
But New Jersey Senator Robert Menendez says the bill corrects card company practices that are making the downturn worse.
Senator ROBERT MENENDEZ (Democrat, New Jersey): This is not just a victory for anyone who has a credit card; it's also about stabilizing our economy. With a trillion dollars in collective debt that Americans have, we can't get it moving if you're on a treadmill in which you can never pay down your credit card.
CORNISH: And bill sponsor Chris Dodd says the system of hitting late-paying customers with high fees and penalties is out of whack.
Sen. DODD: This is not about being anti-credit cards. Credit cards are tremendously valuable and useful tool for consumers, providing them with a kind of relief during critical moments, not just the casual one that occurs but on some major problems that can emerge. So this is hardly designed to be critical. In fact, we just want it to work better.
CORNISH: The House has yet to take up the bill approved today. Democrats are trying to figure out how to handle a controversial amendment added on the Senate side that would allow concealed weapons in national parks. President Obama has said he wants a bill on his desk by Memorial Day.
Audie Cornish, NPR News, the Capitol.
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