Senate passes credit-card overhaul bill
WASHINGTON — The Senate voted overwhelmingly on Tuesday to rein in credit-card rate increases and excessive fees, hoping to give voters some breathing room amid a recession that has left hundreds of thousands of Americans jobless or facing foreclosure.
The House was on track to pass the measure as early as today, paving the way for President Barack Obama to see the bill on his desk by week's end.
"This is a victory for every American consumer who has ever suffered at the hands of a credit-card company," said Sen. Christopher Dodd, D-Conn., chairman of the Banking Committee. The bill passed the Senate, 90-5.
If enacted into law as expected, the credit-card industry would have nine months to change the way it does business: Lenders would have to post their credit-card agreements on the Internet and let customers pay their bills online or by phone without an added fee. They'd also have to give consumers a chance to spare themselves from over-the-limit fees and provide 45 days notice and an explanation before interest rates are increased.
Some of these changes already are on track to take effect in July 2010, under new rules being imposed by the Federal Reserve. But the Senate bill would put these changes into law and go further in restricting the types of bank fees and who can get a card.
Bankers warned the measure would restrict credit at a time when Americans need it most. They defended their existing interest rates and fees on grounds that their business — lending money to consumers with no collateral and little more than a promise to pay it back — is very risky. "What has been a short-term revolving unsecured loan will now become a medium-term unsecured loan, which is significantly more risky," said Edward Yingling, president and CEO of the American Bankers Association. "It is a fundamental rule of lending that an increase in risk means that less credit will be available and that the credit that is available will often have a higher interest rate."
Voting against the Senate measure were GOP Sens. Lamar Alexander of Tennessee, Robert Bennett of Utah, Jon Kyl of Arizona and John Thune of South Dakota, as well as Democratic Sen. Tim Johnson of South Dakota.