US Legislation Pushes New Credit Card Rules

by Jordan Yerman | May 20, 2009 at 09:13 am

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The US Senate and House have approved a new credit card legislation, which now goes to President Barack Obama for signature into law. The bill restricts credit card companies from abruptly switching interest rates. This bill follows closely on the heels of the Credit Cardholders Bill of Rights, approved late last month. The vote was 90-5.

As the bill heads to the House of Representatives, credit card companies are already responding to the new proposed credit card rules by threatening to raise interest rates across the board, even for customers who consistently pay their bills on time.

What does the bill do?

Bans arbitrary hidden fees
Requires full disclosure of credit-card agreement terms
Freezes interest-rate increases
Bans Credit-card companies from charging fees against users who exceed their credit limit
... and more, none of which make credit card companies very happy

Both bills ban hikes to interest rates on existing balances. So say you carry a $1,000 balance at 8%. If the rate on your card changes, the new rate will apply only to new purchases going forward—the issuer won’t be able to start charging 19% on the previous balance.

In other words, they’re threatening to raise fees and limit card availability across the board.

How, exactly, that would be good for their business isn’t clear to me. But this is what people with good credit have feared: That banks would make them pay up if the lenders couldn’t squeeze more out of people whom they deem to be higher risks.