Obama Set to Approve New Rules for Credit Cards

Obama Set to Approve New Rules for Credit Cards
By Nancy Trejos and Debbi Wilgoren
Copyright by The Washington Post
Friday, May 22, 2009; 10:10 AM
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/22/AR2009052200430.html?hpid=topnews


President Obama this afternoon will sign into law a bill that prevents credit card companies from raising interest rates arbitrarily and limits the fees they can charge, meeting his own deadline of enacting the bill before Memorial Day.

The new law offers "needed reforms that provide American consumers with the strong and reliable protections they deserve," the White House said in a statement.

Both the House and Senate passed the credit card legislation by wide margins and with broad bipartisan support. The House later agreed to send the Senate version of the bill, which contained the more stringent reforms, to the White House for Obama's signature.

The Senate legislation, authored by Banking Committee Chairman Christopher J. Dodd (D-Conn.), prohibits card companies from raising interest rates on existing balances unless the borrower is at least 60 days late paying a bill. If the cardholder pays on time for the following six months, the company will have to restore the original rate.

On cards with more than one interest rate, issuers will have to apply payments first to the debts with the highest rates. Before increasing rates on future purchases, the card company will have to give cardholders 45 days' notice.

Card executives have said the changes would prevent them from properly distinguishing between risky and non-risky borrowers and force them to charge everyone higher rates and annual fees. But supporters of the legislation dispute those claims.

Obama and his top economic aides pushed hard for the bill's passage as it was debated in the Senate last week, with the president making the legislation a focal point of the town hall meeting he held May 14 in Albuquerque.

"These practices, they've only grown worse in the middle of this recession, when people can afford them least," Obama told the crowd of about 2,000 people, after being introduced by a resident who is struggling with credit card debt. "You should not have to worry that when you sign up for a credit card, you are signing away all your rights."

The bill will take effect nine months after it is signed. The new law provides much stronger protections than credit card regulations passed by the Federal Reserve in December. Those regulations are scheduled to go into effect in July 2010.