Congress moves to regulate credit cards
Lawmakers have been getting an earful from disgruntled consumers.
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She’s not alone. Some 93 percent of credit cards allow the issuer to raise the interest rate at any time, according to a survey by the Pew Charitable Trusts of more than 400 credit-card agreements by the top 12 issuers.Skip to next paragraph
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In another e-mail, Lori from Rockford, Mich., wrote that her credit card company raised her interest rate from 13 percent to 33 percent. “I e-mailed them and asked them why they were doing this -- that I had been an excellent customer -- and there was no reason for them to raise it. They told me not to take it personally,” she wrote.
Some 87 percent of cards allow the issuer to impose automatic penalty interest rate increases, even if the payment is not more than 30 days or more past due, according to the Pew survey. The median allowable increase was 27.99 percent per year.
“This has got to end,” said Senator Sanders, who is sponsoring an amendment to cap interest rates that credit card companies can charge consumers at 15 percent. In a separate measure, deputy majority leader Sen. Richard Durbin (D) of Illinois is proposing a cap of 36 percent.
Republicans are rallying opposition to such a measure.
The bipartisan agreement involved a key compromise over risk pricing, says Sen. Richard Shelby (R) of Alabama, the top Republican on the Senate Banking Committee. The original Senate draft bill would have prohibited card issuers from using risk profiles in setting rates and terms.
“The Dodd-Shelby amendment allows card issuers to price risk but requires that they consider both positive and negative changes in the consumer’s risk profile when setting rates and terms. This means that consumers will pay more when their credit risk goes up and can have their rates reduced when it goes down,” said Senator Shelby in a floor statement on Tuesday.
The Senate proposal requires credit-card companies to carry out reforms within nine months. The House bill sets a deadline of July 2010 or a year after passage of the bill, whichever comes first.
Consumer groups are urging a faster timetable for reform.
“Reforms should be put into place as quickly as possible,” says David Butler, a spokesman for the Consumers Union. “While the Fed has come out with some very good rules, we’ve heard complaints from all over the country that some companies are taking their last hits,” he says.