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Credit-card bill: What it does, what it doesn't do

Supporters and critics agree that it greatly empowers consumers and changes the credit-card industry.

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-Application of overpayments. It mandates that payments over the minimum be applied first to the credit-card balance with the highest rate of interest. Card-companies typically apply extra payments to balances with the lowest rate of interest.

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-Fair disclosure. It requires issuers to disclose the time and total interest costs it would take to pay off credit card balances, if consumers pay only the required minimum.

-Protections for young cardholders. It provides special protections for consumers under the age of 21. These applicants must have a co-signer who is willing to accept responsibility for payment or proof that he or she has means to repay any credit extended. In cases of joint liability, the co-signer must approve in writing any increase in the credit limit.

Among the things the legislation does not do:

-No cap on interest rates or fees. It does not put a maximum on the interest rates or fees that credit-card companies can charge consumers.

-Disputes don’t go to court. It does not do away with the requirement that consumers with a dispute against their credit card companies take it to arbitration, rather than to the courts. Arbitration decisions typically favor credit-card companies, consumer groups say.

-Interchange fees. The highly controversial issue of “interchange fees” was deferred to a study by the US Government Accountability Office. Retailers wanted Congress to regulate the fees charged to merchants every time a consumer uses a credit card for payment, eating into their profits.

These omissions signal that “the banks still have residual power on Capitol Hill,” says Ed Mierzwinski, a consumer advocate with US PIRG in Washington. “Those are things we’ll need to do in the future. It’s still a great bill, though.”

But banking groups say that the bill will raise costs to consumers and limit access to credit among people who need it.

“We are concerned that the Senate bill will have a dramatic impact on the ability of consumers, students, and small businesses to obtain and use credit cards,” said Edward Yingling, president and CEO of the American Bankers Association, in a statement after the Senate vote.

If the big banks and credit-card issuers raise their rates, smaller banks could benefit.

“Our banks are going to learn to live with the restrictions,” said Steve Verdier, director of congressional relations at Independent Community Bankers of America, after the vote. “But if the big banks make their products even less friendly than they already are, I’m hoping that consumers will rediscover the value of getting credit cards from community banks.