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Credit Card Reform Imminent: Senate Passes CARD Act of 2009

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May 20th Update: The House of Representatives gave their approval of the CARD Act passed in the Senate and the bill is on its way to President Obama.

Today, the Senate voted 90-5 in favor of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, which is one step closer to credit card reform in America. In April, the House of Representatives passed a similar Credit Cardholders’ Bill of Rights Act of 2009 (357-to-70) and now the two chambers must reconcile the bills for President Obama to sign into law.

Here are the major parts of the Senate CARD Act:

  • Credit card companies cannot raise interest rates on existing balances unless a card holder was 60 days behind.
  • If a credit card company raises rates, six months of on-time payment would restore the interest rate to the previous level.
  • Companies must notify consumers 45 days in advance of any rate increases.
  • Companies cannot charge a late fee if they were late in processing a payment.
  • Statements must be mailed 21 days before the payment due date.
  • Rules were put in place that would make it harder for for companies to issue cards to those under 21.
  • Interest rates cannot be increased within the first 12 months, promotional rates must be in place a minimum of 6 months.

The major points of the House’s Credit Cardholders’ Bill of Rights Act of 2009 are similar. The House’s version also requires promotional rates to remain in effect for a minimum of 6 months and other similarities regarding interest rate hikes and payment rules. There are additional rules in the House version that remain to be reconciled. For example, in the House bill, credit card companies must warn a customer if they get close to their credit limit.

It’s expected that the two bills will be reconciled and President Obama will be able to sign the bill into law before Memorial Day recess.

Credit Cardholders’ Bill of Rights Act of 2009 [Thomas.gov]
Credit CARD Act of 2009 [Thomas.gov]
Senate Passes Bill to Restrict Credit-Card Practices [New York Times]

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29 Responses to “Credit Card Reform Imminent: Senate Passes CARD Act of 2009”

  1. superch665 says:

    Hi, your link #2, Credit CARD Act of 2009 [Thomas.gov], returns error, Please resubmit your search.

  2. StephaniePTY says:

    I’m not a fan of the “Rules were put in place that would make it harder for for companies to issue cards to those under 21.” Mostly because of what we were talking about in your post earlier today – the importance of college students (and other young people) starting to establish a credit history. Also, people my age aren’t going to act like adults if the government keeps finding more ways to treat us like we’re not adults. We already can’t be considered “independent” of our parents for federal financial aid purposes until we turn 24… apparently we’re not financially “adults” until 21+.

    • Jim says:

      Yeah, that one I was a little iffy about, but they have to deal with realities and the reality is young people are bad with credit… so let’s wait until they mature more before giving them the keys. I’m not saying it’s fair, but that’s life.

      • StephaniePTY says:

        I’m not sure regulation is the answer here, though. I mean, if they’re going to use the age of 21, let’s use the obvious comparison: alcohol. Does the drinking age of 21 make young people more responsible about alcohol? Doesn’t seem to. This regulation seems to be attacked a symptom, rather than the problem.

        I wrote about this on my own site (just, like, 2 seconds ago!), but I’ll summerize here: we need to focus on things that actually work, instead of trying to regulate our way out of this problem. One thing that I’ve seen work really well is colleges that ban credit card companies from soliciting on their campuses. My college did it, and most of my friends didn’t even get credit cards, let alone abuse them. Will they be more responsible if they get a credit card later on in life? I hope so. I think it needs to be a joint effort though – banning credit card companies from campus, and teaching money management skills to the student body at the same time.

  3. Darin says:

    buh bye good rewards, goodbye to no annual fees, maybe even goodbye to grace periods.

    bailing out irresponsible people at the expense of the responsible (again), yay government!

  4. jared says:

    I can’t even begin to explain how many things are wrong with Darin’s comment so I’ll limit it to this. There is no part of this bill meant to protect irresponsible people but rather to protect everyone, including yourself from unfair rate hikes, fees and double cycle billing. This is about people being ripped off by these companies for decades with no end in sight and the government realizing that we as a nation lose millions of dollars every year that could be getting spent and driving our economy. There is no “Bailout” involved, no one is getting handed anything.

    • Darin says:

      yes, I was being over the top with hyperbole (it’s the Interwebz after all). While on the surface, some of these ideas seem nice, they will have consequences like fewer people issued credit cards or have lower limits (maybe not a bad thing IMO I guess). I pay my cards off every month, so I don’t have to worry about rate hikes, fees and double cycle billing. I couldn’t even tell you any of the interest rates without looking it up. You want to know how to not be “ripped off” by a credit card company? It’s easy – don’t carry a balance and pay on time. It’s not rocket surgery. Somehow in the almost 20 years of using credit cards I’ve never been ripped off in our mutual business arrangement.

      Do you doubt that the unintended consequences will be fewer benefits for those who don’t run a balance? No worries for our family, I guess we’d be out the $400-500 in cash back per year, but then I can just pay debit/cash for anything.

      Maybe we can force banks to issue credit cards to people who can’t repay the loans and then not let the banks charge enough interest to cover their losses on risky unsecured loans. It’ll be rainbows and unicorns for everyone, just like housing!

      • Jim says:

        I firmly believe benefits will go down a lot when these rules are put into effect. Whenever you cut into their profits, they will pull back benefits for cardholders because the pie has gotten smaller. In the end I think the net benefit to society will be higher.

        • Darin says:

          I don’t know about the net benefit to society, there are probably unintended consequences that we haven’t even thought of yet. We’ll have to see how it all plays out I guess.

    • tom says:

      Is it a rip-off when credit card companies clearly state “unfair” practices in their Terms and Conditions?

      From Citi:
      “We have the right to change the rates, fees, and terms at any time, for any reason, in accordance with the cardmember agreement and applicable law. These reasons may be based on information in your credit report, such as your failure to make payments to another creditor when due, amounts owed to other creditors, the number of credit accounts outstanding, or the number of credit inquiries. ”

      A credit card is a revolving loan, you sign a contract when you apply. If you do not pay off your loan each month, then you must face the consequences. Unfair rate kikes, fees, double cycle billing are agreed to by the consumer. It is your responsiblity to understand the contract you sign. If you don’t like the terms, find another card or don’t sign up.

  5. Mark says:

    I liked it Darin. Like you, I pay my CC off every month. I foresee what you are saying happening. But, I will just either pay cash or start writing checks again.
    There is a moral hazard to the banks. They could effectively make those who are their absolute lowest risk customers stop using their services. The unintended consequences of this act will then become apparent.

    We are a debtor society. An always expanding debt. When expansion stalls or reverses, then the gig is up.

  6. Hogan says:

    The credit cards business model is broken. They were essentially playing regulatory arbitrage by blocking any changes while the Republicans controlled Congress just like the hedge funds were doing.

    I think that credit tightening for irresponsible people and the credit card companies being required to clean up their junk fees and gotcha moments is a good thing, see America is righting the ship.

  7. thomas says:

    People that think these changes are going to be to the benefit of the real consumers (those who do not carry balances, spend within their means, etc) are the same that think taxing oil companies and big corporations is going to help. The consumer always has and always will bear the burden. Companies do not pay taxes, the consumer does and it’s reflected in the purchasing price.

    Sure, this will “help” irresponsible people, that is until the CC companies (like banks) tighten their lending cheeks and not let you squeeze a dime from them. Then how will these overspending people live?

    • Harrison says:

      Time for those overspending people to change their habits on money. Anyway I believe banks will do something on this to continue their profitable business.

  8. Pat says:

    Some of you don’t seem to understand that a company that makes profits is a company that both offers more services and employs more people.

    Ask yourself why companies are being blamed for the reckless decision of some individuals? Credit card companies don’t do anything that they don’t warn you about when you apply for your credit card. It blows my mind that people are rejoicing at companies being punished for offering a service that is clearly in demand.

    • Jim says:

      I agree, but some things were a little too much. Double cycle billing? It’s like unions, when employers took advantage of workers, they formed unions. Now the pendulum is swinging the other way with powerful unions watching the employers crumble under the weight of their group negotiated agreements. It will all work out in the end, it’s just a convenient time to slam on credit card companies.

  9. eric says:

    Seems a lot of people are doubtful, but I personally applaud the move. I didn’t think it would receive such overwhelming support though.

    I’ll be the first to admit that this bill is far from perfect (the 21 thing is entirely disagreeable with me) but it’s a step in the right direction to me. Call me an optimist I guess.

    • Jim says:

      I think it’s one of those political issues that very few politicians are willing to vote against, I saw a map and most of the votes against were in states where credit card companies call home (where many jobs are at credit card companies).

    • tom says:

      It’s a populist bill, a majority of Americans carry a balance, so they are completely in favor of the bill.

  10. labelcd6 says:

    Normally, I am for as little government regulation as possible. If people want to bury themselves in credit card debt, let them.

    However, the problem is that people’s poor choices in terms of credit card debt have negatively affected the entire nation because politicians are swayed by populist appeal.

    If we lived in a truly capitalist country, one in which no companies were “too big to fail,” one in which responsible individuals were not expected to bail out irresponsible individuals, then I would be opposed to credit card regulation. However, the United States is not that type of country anymore. Perhaps it never was.

    Get used to this type of thing because it’s only going to become more common. We are not individuals in little row boats, merrily making our way upstream. We are shackled together, for better or for worse, with some of us (responsible people) making up for the laziness of others.

    Is this truly a free market? No. Of course it’s not. Is it the “most free” market in the world. I’d say so.

    In other words, I’m all for the government regulating the madness of credit card debt, the PayDay Loan for the middle class.

    P.S. – I have no credit card debt, don’t use them, and never will.

  11. ataylor222 says:

    I am glad to see that it will be harder to issue under 21 cards. They are at such a vulernable age for not understanding what a credit card really is.

    I do not think that the bill is perfect but I think it is showing some responsibility for protecting our young people when parents are not teaching their children about money.

  12. Pat says:

    First I wanted to correct the person who said they thought the US had the most free market in the world. In 2008, the US was ranked 8th most free economy and I would put a lot of money on the US dropping significantly for the 2009 rankings (Reference – Fraser Institute).

    Secondly, the 21 year old requirement is absurd. If society is going to make 18 the legal age of adulthood then every 18 year old should have the same rights as any other adult. I opened my first credit card at 18 and now 5 years later I have an excellent credit rating in the high 700s. Credit cards have also been an invaluable tool to improve liquidity issues that many young adults have entering the “real world”.

    I agree that some of the credit card company practices were bad but using the government to try to solve the problem is simply the wrong approach.

  13. Chris says:

    There used to be usury laws in this country to protect people from the ridiculously high interest rates on credit cards. Those have been repealed thanks to the lobbying efforts of the industry. Credit cards have been making money hand over fist extending credit in an unsustainable way to people who have no hope of paying it back. They are paying for this now.

    I applaud all of you for being responsible with credit. I’m sure most of you come from stable backgrounds and good educations. I don’t carry a balance on my cards either. You have to understand that many people with credit issues have not had the same access to consumer education that you have had. I’m all for rules that help to protect consumers from the really odious practices of the industry. If anything, this bill does not go far enough.

    As far as credit card companies cutting back on “goodies”, this is all bluster. They want to keep all of you as customers as replacing you costs them a ton of money and there is too much competition out there for your business. If your rewards get cut back, cancel your card. You will take a hit on your credit score, but it’s only temporary.

  14. Garage Sales says:

    It will be interesting in the long run how this pans out. Hopefully for the best.

  15. hoosierbee says:

    I believe I read an article about one of my CC providers- if this passed they would have to cut way back on the amount of credit they issued and # of cards. Their benefits weren’t great anyway, so it looks like I need to close them before they close me!

  16. margie says:

    I have heard that you start paying interest the minute that you swipe your card. This means of course that when you receive your first bill there will be interest already charged. Is that correct.

  17. aua868s says:

    could the high handed attitude of credit cards be tamed by these laws?..well, time is the answer..

    • aua868s says:

      left a word off….
      could the high handed attitude of credit cards COMPANIES be tamed by these laws?..well, time is the answer..


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