Update on Credit Card Legislation

HAI continues to track credit card and banking legislation, an issue that affects all of our members, as both the House and Senate take on the credit card industry this week by considering legislation that would curb certain credit card practices that consumer activists have labeled abusive.

The Senate Banking Committee will mark up Chairman Christopher Dodd’s (D-Connecticut) bill to prohibit banks from raising interest rates for any reason, limiting such action to specific instances such as expiration of a teaser rate or a default on the account. The bill would limit penalty rates to six months if there are no other violations, prohibit penalty fees upon a payment mailing seven days prior to due date, and require that statements must be mailed out within 21 days of a due date.

Dodd’s bill would also eliminate double-cycle billing, where an institution assesses interest on the entire amount charged during one month unless the bill was paid in full.

The House Financial Services Financial Institutions Subcommittee will mark up a similar bill sponsored by Congresswoman Carolyn Maloney (D-New York).  The Federal Reserve last year issued rules cracking down on some questionable practices, but consumer groups said it did not go far enough and were upset that they would not be implemented until July of 2010. The Maloney Bill would implement such changes 90 days after enactment.

HAI reports a retailer coalition has launched a campaign to persuade eight House Financial Services Committee members to endorse an effort to curb the fees that banks charge merchants for using a credit or debit card. The lawmakers being targeted are junior members on the panel and lawmakers from swing districts. The merchants are protesting the fee, which averages 1.75 percent, that they are charged for using Visa and MasterCard networks to process each debit- and credit-card transaction, arguing that they have no say in the pricing and that rules are arbitrary. The fees totaled $48 billion in 2008. Banks dispute the contention, saying that merchants are looking to reduce their costs, not pass savings on to consumers.

In the last Congress, the coalition pushed a measure that would require Visa and MasterCard to negotiate with them on lowering the fee. The House Judiciary Committee approved it, 19-16, but it was stalled in a jurisdictional spat with House Financial Services Chairman Barney Frank. Since then, however, Frank has indicated an expanded interest in the issue because of the similar factors behind it and behind subprime mortgages.

Posted on Monday, March 30, 2009 by rotornews