Congress Passes Credit Card BillCongress passed credit card legislation that will make sweeping changes in the market, with limits on sudden hikes in interest rates that drive consumers deeper into debt. Even cardholders who pay off their balance each month may face new annual fees or lose out on rewards programs.
Congress passed the legislation Wednesday and sent it to President Barack Obama, who plans to sign it on Friday. The bill will restrict when and how a card company can raise an individual's interest rate, who can receive a card and how much time people are given to pay their bill.
Banks are against the legislation and say they will have to make up the cost somewhere, including imposing annual fees on cardholders who pay off their balance in full each month. Credit may also be restricted.
Some of the changes, including a requirement that cardholders receive 45 days notice before their rates are raised, will also go into effect in July 2010 under new regulations by the Federal Reserve. The legislation would put these changes into law and go farther in restricting when and how banks charge people and who could get a card.
For example, the bill would require people under 21 to prove first that they can repay the money or that a parent or guardian is willing to pay off their debt if they default. The House passed the reform bill by a 361-64 vote on Wednesday. The Senate had voted, 90-5, for the measure on Tuesday.
In 2008, the Nilson Report estimated that more than 700 million credit cards were in circulation in the United States. Many cardholders are carrying high balances. According to the Federal Reserve, the nation's consumers carry approximately $2.5 trillion in debt, excluding home mortgages.