Bill to expedite credit card reforms

A hearing was held to discuss a Bill introduced in the United States House of Congress to move up the effective date of credit card reforms from next year to December 1, 2009. The main reason for moving the date forward is to curb abuses by credit card companies, according to the sponsors of the legislation.

The remaining provisions of the credit card reform are to be effective in February and August 2010, according to current law.

Some of the key provisions that will go into effect then ensure:

• Interest rate on a new credit card won't change during the first year after an account is opened
• Interest rate on an  existing credit card balance won't change until it is paid off

Carolyn Maloney (D-NY), who is sponsoring the legislation, states that "There are widespread media reports—as well as widespread complaints from our constituents—that card companies are changing rates and terms to get in 'under the wire' before the new law goes into effect," next year.

The Pew Charitable Trust reports that interest rates have spiked by an average of 20% on credit cards representing more than 91% of the $864 billion in outstanding credit card balances.

In testimony opposing the expediting of the credit card reforms, Kenneth Clayton, representing the American Bankers Association,  said the credit card reforms currently going into effect next year "requires a massive reworking of internal operations" and to do it right, requires a huge investment of time and money. "We do not believe that the time frame provided [December 1] is adequate for the task at hand, and, as a result, consumers, small businesses, and the American economy will suffer," added Clayton, who is senior vice president and general counsel of the American Bankers Association Card Policy Council.

In testimony supporting bringing the date forward, Ruth Susswein, Deputy Director, Consumer Action, said that her organization discovered that between a March 2009 survey of credit cards and June, that "major credit card issuers had arbitrarily increased rates, spiked fees and hiked minimum payments." Therefore, bringing the date forward "would help protect cardholders from many of these abusive tactics," Susswein added.