House Approves Bill Restricting Credit Card Practices

WASHINGTON (AP) - Riding a crest of populist anger, the House on
Thursday approved a bill to restrict credit card practices and
eliminate sudden increases in interest rates and late fees that
have entangled millions of consumers.

The legislation, dubbed the Credit Card Holders' Bill of Rights,
passed by a bipartisan vote of 357-70 following lobbying by
President Barack Obama and members of his administration.

The measure would prohibit so-called double-cycle billing and
retroactive rate hikes and would prevent companies from giving
credit cards to anyone under 18.

If they become law, the new provisions won't take effect for a
year, except for a requirement that customers get 45 days' notice
before their interest rates are increased. That would take effect
in 90 days.

Similar legislation is before the Senate, where it could be
taken up as early as next week.

"This is a unique opportunity to end abusive practices that
afflict millions of families across the nation, to contribute to
our economic recovery, and to take a stand for American
consumers," Sen. Christopher Dodd, chairman of the Senate Banking
Committee and the bill's primary sponsor, said after the House
vote. "Now it is the Senate's turn to act."

Consumer advocates and some Democrats have unsuccessfully sought
for years to bring new rules to the industry.

Supporters want to put a final congressional package under
Obama's eager pen by the Memorial Day holiday. They acknowledged,
though, that House passage of the measure was an opening salvo and
a lengthy legislative slog lies ahead, in which industry interests
could prevail in getting restrictions weakened.

"The administration supports Congress' efforts to ... provide
additional strong and reliable protections for consumers that ban
unfair and abusive practices," the White House said in a statement
following the House vote. "The nation's credit card system must
have more accountability, including more effective oversight and
more effective enforcement of credit card issuers who violate the

Obama's engagement in the issue diverged sharply from his
handling of a plan to spare hundreds of thousands of homeowners
from foreclosure through bankruptcy, which met defeat in the
Democratic-controlled Senate Thursday on a 45-51 vote. Obama had
embraced the plan, but facing stiff opposition from the banking
industry, he did little to pressure lawmakers who worried it would
encourage bankruptcy filings and catapult interest rates higher.

Before approving the credit card bill, the House adopted a
series of amendments - some of which were pushed by the White House
- that amplified the restrictions on industry practices.

The House measure incorporates Federal Reserve regulations due
to take effect in July 2010 but goes further by adding restrictions
for credit cards for college students as well as other changes.
Payments made by card holders that exceed the minimum monthly level
would have to be applied first to the portion of the remaining
balance with the highest interest rate, and then to any other
balances in descending order.

Consumers would have to be notified 30 days before their
accounts are closed.

Double-cycle billing eliminates the interest-free period for
consumers who move from paying the full balance monthly to carrying
a balance.

Opponents tried vainly on the House floor to temper a
fast-moving bill with amendments that would have given credit card
issuers some openings to raise rates within the proposed

"We shouldn't take credit opportunities away," said Rep. Jeb
Hensarling, R-Texas. "I just want consumers to have choices. I
want there to be a competitive marketplace."

Hensarling and other Republican opponents endorsed the bill's
requirements for clearer disclosure in the fine print of credit
card agreements. But they said the legislation overall could prompt
lenders to restrict credit in an already tight market to compensate
for the new requirements.

That's the leading argument made by banking industry executives
against the legislation.

Edward Yingling, president and CEO of the American Bankers
Association, said the group "strongly believes that any additional
legislative efforts should strive to achieve the right balance
between enhancing consumer protection, and ensuring that credit
remains available to consumers and small businesses at a reasonable

"We continue to believe that more work needs to be done to
achieve that balance," he said.

Supporters of the bill also drew on the economic crisis to make
their case.

"Americans deserve a fair shake," said Ed Perlmutter, D-Colo.
The credit card industry "has taken advantage of millions of
vulnerable Americans."

Rep. Carolyn Maloney, D-N.Y., the bill's chief sponsor, said the
changes were needed because "many people are turning to their
credit cards because they have lost their jobs."

The bill's boosters are tapping into public anger over corporate
excesses and the conduct of banks and other companies receiving
billions of dollars in taxpayer money.

"At a time when millions of families continue to struggle to
make ends meet, additional safeguards are needed to ensure
consumers are not being saddled by questionable industry
practices," the powerful AARP, the lobbying group representing
seniors, said in a statement supporting the bill.

Obama met at the White House last week with executives of the
credit card industry and made clear he wants to sign a bill into
law. And a day before the House vote, Treasury Secretary Timothy
Geithner convened a meeting with Maloney and representatives of
consumer and civil rights groups.

"We need new commonsense rules of the road to establish a more
fair, transparent, simple consumer credit market," Geithner said
in a statement issued Thursday. "This bill is a major step toward
that goal."

The administration is advocating stricter practices that could
crimp banks' revenue at the same time the government is shoring up
the financial institutions with hundreds of billions of dollars in
bailout aid.

The credit card changes could cost the banking industry more
than $10 billion a year in interest payments, according to a study
by the law firm Morrison & Foerster.

Amid the recession and rising job losses, consumers - even those
with strong credit records - have been defaulting at high levels on
their credit cards. Banks already battered by the mortgage and
credit crises have been bleeding tens of billions in red ink from
the losses.

U.S. credit card debt has jumped 25 percent in the past 10
years, reaching $963 billion in January, according to figures from
the White House. The average outstanding credit card debt for
households that have a card was $10,679 at the end of 2008,
according to, an online market.
House bill: H.R.627
Senate bill: S.235
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