October 28th, 2009
03:30 PM ET
4 years ago

Credit card hikes raise Congress' blood pressure

WASHINGTON (CNNMoney.com) - As credit card companies continue raising rates and fees, lawmakers are considering bills to stop such hikes until new credit card laws take effect.

In the House, a key committee passed a bill to move up by nearly three months the start date of new laws aimed at cracking down on the way credit card issuers raise fees and assess credit risk. The new start date would be Dec. 1, up from Feb. 22.

"It was argued. . . that they needed more time, and we granted them more time, but it was under the understanding that abusive practices would not continue, and double and increase dramatically," said Rep. Carolyn Maloney, D-N.Y., a bill sponsor, debating amendments to it.

The House Financial Services committee passed it on a voice vote.

In the Senate, Sen. Chris Dodd, D-Conn., Sen. Charles Schumer, D-N.Y., and others have introduced a bill to freeze credit card interest rates until the new legislation takes effect Feb. 22.

"We worked long and hard to enact the safeguards included in the Credit CARD Act," Dodd said. "And no sooner had it been signed into law, but credit card companies were looking for ways to get around the protections this Congress and the American people demanded."

Congressional watchers say that the odds are against passage for either bill, especially since the two are not identical.

"For now, this seems to be much more about scoring political points by beating up on unpopular credit card companies than on pushing legislation that can get enacted quickly," said Jaret Seiberg, an analyst with Concept Capital's Washington Research Group.

Still, public outrage continues to boil over on the topic, especially as card issuers continue to hike rates.

On Tuesday, the Pew Charitable Trusts released a study showing that interest rates rose by an average of 23% from December 2008 to July 2009.

Also, they found that all the largest banks and card issuers had engaged in practices that would be prohibited under the new credit card laws, such as hiking penalty rates on those who are just barely late on a credit card payment. The new law would only allow such a hike if the cardholder is more two months late.

"The unfair and deceptive practices that the credit card act targets remain widespread, and in some cases we've seen it getting worse," said Nick Bourke, manager of the Pew Safe Credit Cards Project.

The banks say that tinkering with the new law start date is unnecessary. They say rates are rising because customers and economic times are riskier. Record number of cardholders have been walking away from card debt, unable to pay, according to Federal Reserve data.

"We oppose it, because the two main factors driving the changes are the increased risk of nonpayment from the borrower and the riskiness of the economy," said Scott Talbott of the Financial Services Roundtable, a business lobbying group.

Last week, Republicans on the House panel pointed to a letter that Federal Reserve Chair Ben Bernanke wrote, in response to questions asking about the consequences if Congress moves up the effective date. Bernanke said it could be tough on companies, and it would prevent the Fed from getting feedback on proposed its new rules cracking down on fees.

"Although a December 1 effective date could provide benefits for consumers, the Board continues to believe that. . .card issuers must be afforded sufficient time for implementation to allow for an orderly transition and to avoid unintended consequences," Bernanke wrote.

The Credit CARD Act was signed into law by President Obama on May 22, with a first round of changes - including giving cardholders 45 days notice before a hike takes effect - taking hold in August. The more substantial changes were slated to take effect about six months later.

Among other things, the new law bans rate hikes unless a consumer is more than 60 days late - and then restores the previous rate after six months if minimum payments are made. It also makes it harder for people under age 21 to get credit cards.


Filed under: Congress
soundoff (8 Responses)
  1. mark

    You are kidding me right? This is the most absurd thing I have read, well since yesterday regarding articles pertaining to polititians, the public, and credit card companies You mean to tell me that not one congressman or woman knew that the credit card companies would not retaliate after congress passed the credit card company laws earlier this year? Does congress think the american people that they represent are a bunch of idiots? Congress knew and the American public knew the credit card companies could retaliate once congress passed their laws. Like congress goes on with business and no favors are ever passed on from the lobbyists for the credit card companies or from the credit card companies. Congress knew this all along and now they are acting as if they are surprised. Please end this non-sense. So many american are suffering, and I'm talking about those who pay on time and have good credit.

    October 28, 2009 04:47 pm at 4:47 pm |
  2. H cohen

    Banks like Chase don't care. They are raising rates to 22% plus prime on accounts that have never been late and where more than the minimum is always paid. they have arbitrarily cut limits in 1/2 or more thus impacting credit scores. Get a clue. they paid back their using taxpayer money when they raised rates.

    October 28, 2009 04:49 pm at 4:49 pm |
  3. Andy

    Interesting. Here's an idea, why not craft legislation that every single home is now free and clear from mortgage debt. We've given these banks 100s of billions of tax dollars, they drag their feet on modifications because we've paid them so much in interest and given them so much in bail out that foreclosing is no longer unprofitable, and just to twist the knife they stabbed in our back, they now hike interest rates to 30 times the rate they pay themselves.

    So why not treat them as they treat us. Have Congress wipe the debt of every loan, credit card and mortgage. They don't employ any of us anyway, all the jobs have been offshored so it's not like we have anything to lose when they go bankrupt. Apparently it's our money that's keeping the credit markets afloat, as shown by the huge profits of Goldman Sachs et all, so it's not even as though we need them for that either.

    October 28, 2009 04:54 pm at 4:54 pm |
  4. Reg

    Wow I find it amazing that low to high credit scores is a farce and
    overwheming bought n paid for Congress persons of both parties!

    Campaign Finance / Public Funded Elections are the ONLY WAY
    TO GO! As well as MEDICARE FOR ALL AMERICAN CITIZENS is
    THE ONLY WAY TO KEEP COST DOWN AND GREED under some
    control!

    Don't the Politicians use credit cards as their families too??????
    If it's ok to ripp off family members then "WE ARE DOOMED"!

    October 28, 2009 05:01 pm at 5:01 pm |
  5. ran

    We are surprised by the CC people. Not

    How about a national non-profit bank so your deposits could get a decent interest rate because more money would be available instead of going toward multimillion $ salaries/bonuses to executives and for dividends to shareholders or their private jets.

    Just like health care and energy the banks will do all they can to keep things as they are. We the people need to say no and get our share and the way to do this is simple: non-profit health care/banks/energy.

    Any of you who want to continue feeding the greedy executives of the health care/banks/energy be my guess; just let me have the non-profit option.

    October 28, 2009 05:02 pm at 5:02 pm |
  6. Sandy Teachey

    Please-we need help on this- bad--I had Chase to raise my rate twice in 6 months, Feb to 17.99 and last week to 25.99 and got another notice on another one that it is going from 9.99 to 16.74 the first of December-yes, I owe them money and I have not problem paying what I owe–but please–these increases have added over $150.00 more a month for us. I have always had good credit and paid on time, plus I do not use the card– NOW. This is really going to hurt us. I called– did not get any help in getting rates lowered. Please do something!!!!!!!!!!!!!!!!

    October 28, 2009 05:02 pm at 5:02 pm |
  7. Bluebonnet

    Thanks to this glorious administration, all of my credit cards have raised my once low interest rates and some have decreased the credit limit and one cancelled my card altogether. Now, I've got a 756 credit score, no late payments, pay over amount due and early each month. Now, thanks to Nobama's so-called laws THAT DON'T TAKE EFFECT UNTIL 2/2010 – I owe more money than I did! Now, that's taking care of us, isn't it?

    October 28, 2009 05:08 pm at 5:08 pm |
  8. Scott, Tucson

    How about limiting the interest rates a bank can charge to but 2% to 5% above what they give their customers on their savings accounts?

    October 28, 2009 05:10 pm at 5:10 pm |