Riding the wave of consumer distrust of the financial services industry, legislation placing restrictions on credit card companies sailed through Congress and was signed by the President.  The Senate passed the Credit Cardholders’ Bill of Rights Act of 2009 on May 19 by a vote of 90-5.  The House replaced a weaker version of the credit card bill it had approved in April with the Senate bill passing it 361-64 on May 20.  The President signed the Act, PL 111-24, into law on May 22.
Provisions in the act cover a range of consumer concerns including changes to interest rates, timing of payments, disclosure of terms and conditions, and safeguards for young people.  The act prohibits credit card issuers from increasing rates on a cardholder in the first year after a credit card account is opened; requires promotional rates to last at least 6 months; requires payments in excess of the minimum to be applied first to the portion of the credit card balance with the highest rate of interest; increases from 14 to 21 the number of days a credit card statement must be mailed before the bill is due; prohibits late fees if the card issuer delayed crediting the payment; requires cardholders to be given 45 days’ notice of interest rate, fee and finance charge increases; and requires full disclosure in billing statements of payment due dates and applicable late payment penalties.  The legislation also requires issuers wishing to extend credit to young consumers under the age of 21 to obtain the signature of a parent or someone over 21 years of age who will take responsibility for any subsequent debt on the account, unless the young applicant has an independent means to repay the loan. Finally, existing penalties are increased for companies that violate the Truth in Lending Act for credit card customers.

During Senate consideration of the bill, Senator Bernie Sanders (I-VT) offered an amendment that would have limited the annual interest rate on credit cards to 15 percent.  The amendment failed on a procedural vote 60-33.  Leading bill sponsor and Banking, Housing and Urban Affairs Committee Chairman Christopher Dodd (D-CT) committed to address the issue of rate caps later this year when taking up legislation to overhaul financial industry regulations.  The Chairman avoided the thorny issue of fees credit card companies charge merchants for credit card transactions by adding a requirement to the bill that the General Accounting Office conduct a study on these fees.  Senators Richard Durbin (D-IL) and Christopher Bond (R-MO) were prepared to offer an amendment allowing merchants to give consumers a discount to pay by cash, check or debit card rather than by a credit card, a provision strongly opposed by the financial services industry.

Because the credit card protections were seen as must-pass legislation, Senator Tom Coburn (R-OK) offered an amendment unrelated to the core bill to allow people to carry concealed and loaded firearms into national parks and wildlife reserves if state laws in which the parks are located do not prohibit it.  The strategy worked.  Strongly supported by the National Rifle Association, the amendment passed the Senate by a vote of 67-29 and the House 279-147 and was added to the final bill.

In December, the Federal Reserve Board proposed new rules to rein in deceptive practices in the credit card industry that were scheduled to take effect in July, 2010.  The new legislation codifies and strengthens many of these rules and moves the effective date up to February 22, 2010.

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