Senator seeks to limit credit card interest rate hikes, industry opposes UPDATE
04.30.08, 12:53 PM
WASHINGTON (Thomson Financial) - A key Democratic senator will introduce legislation that would put limits on the ability of credit card issuers to raise interest rates, give them notice when rates must rise and prevent them from charging interest on late fees and other charges.
The bill, from Senate Banking Committee chairman Christopher Dodd of Connecticut, is aimed at stopping what he calls 'abusive credit card practices that drag consumers into staggering amounts of debt, and too often harm'.
A source familiar with the legislation said the bill would require 'sweeping reform of credit card industry practice'. The bill is being introduced at a time when credit card defaults are rising as the economy slows.
But a major industry association warned the bill would go too far in curbing the activities of credit card issuers.'We have serious concerns that this legislation could hurt much-needed consumer access to credit by inserting the federal government into credit markets in unprecedented ways,' American Bankers Association president and CEO Ed Yingling said today.
'We are concerned that the changes outlined in this legislation would have serious, unintended consequences such as unfairly raising the cost of credit for consumers -- even those who have a record of managing their credit well,' he added.
Specifically, the bill would prevent credit card issuers from increasing interest rates on cardholders in 'good standing' for reasons that are not related to the behavior of the cardholder. When rates must rise, the bill would require card issuers to give 45 days' notice.
It would also require card issuers to apply payments received to the balance with the highest interest rate and to minimize finance charges, the source said.The bill would also prohibit interest charges on debt that is paid on time and would prohibit interest charges on credit card transaction fees, such as late fees and overlimit fees.
News Source : http://www.forbes.com |
