President Barack Obama asked for a new credit card reform bill Thursday, saying he wants Congress to send it to him by May 25. The U.S. Senate, which is bogged down by amendments, debated the plan Thursday.
Republicans are mocking Obama’s credit card reform ideas with a new video available on YouTube. The bill is also bogged down by a new amendment that would allow concealed weapons in national parks and refuges. The amendment has nothing to do with credit cards, but welcome to Washington.
The president said he wants a bill that would make it more difficult for credit companies to suddenly jack up interest rates and that would abolish unfair and hidden fees. The Senate version of the bill would require a 45-day notice before a bank could raise interest rates.
The House has already passed a version of the bill that requires banks to apply a customer’s payments to the balances that have the highest interest rates first.
A key issue in the Senate is whether to include a provision called universal default, which is how credit cards raise your interest rates based on factors that may have nothing to do with your use of the card itself. Bankrate.com explained:
“The provision, generally buried in the fine print of your credit card agreement, basically says that if you are more than 30 days late on any payment to anyone, the interest rate on your credit card could shoot up and your credit score may be damaged.
“The problem has reached an all-time high, say consumer credit experts.
“‘Universal default complaints are definitely on the increase — at a disturbing rate,’ says Paul Richard, executive director of the San Diego-based nonprofit Institute of Consumer Financial Education. ‘More than one-third of major credit card issuers now say they act on these clauses regularly.’ A recent survey found that a staggering 39 percent of credit card issuers said they apply the rule to customers, even if they had no late payments on their own card.”
- Imposes a freeze on interest rate terms and fees on canceled cards.
- Sets limits on fees and interest charges, including a prohibition against penalties for on-time payments.
- Prohibits a creditor from furnishing information to a consumer reporting agency concerning a newly opened credit card account until the credit card has been used or activated by the consumer.
- Revises requirements for prompt and fair crediting of card payments.
- Prohibits universal default (except in certain circumstances) and unilateral changes to cardholder agreements.
- Increases the civil penalty against any creditor who fails to comply with specified requirements in the case of an individual action relating to an open end credit plan that is not secured by real property or a dwelling.
- Prescribes procedures for specified federal regulatory agencies to evaluate credit card issuers for compliance with this Act.
- Revises: (1) payoff and repayment timing disclosure requirements; and (2) requirements relating to late payment deadlines and penalties.
- Prohibits issuance of: (1) a credit card on behalf of a consumer under age 21, unless the consumer has submitted a written application meeting specified requirements; and (2) certain affinity cards to students unless certain requirements have been met.