The Senate takes up the Credit Cardholder's Bill of Rights on Tuesday, a package sponsored by Sen. Chris Dodd (D-Conn.) that seeks to rein in certain abusive credit card practices.
The bill comes more than a week after the financial industry dealt homeowners a blow by defeating an effort by Sen. Dick Durbin (D-Ill.) to allow owners to renegotiate mortgages in bankruptcy court. A dozen Democrats opposed the initiative, as did every Republican. The White House declined to push for the bill and it fell 15 votes short of the 60 needed to cut off a filibuster.
Both Republicans and Democrats say that the debate over credit card rules feels different. "Bankruptcy reform, important as it was, was sort of esoteric. If you went into O'Halloran's Pub, the fellas aren't saying to you, 'What's going on with bankruptcy reform?'" Sen. Charles Schumer (D-N.Y.) told the Huffington Post. "But they might say, 'What are you doing about my credit cards?' The average person feels the second much more than the first, even though both are important."
Sen. Mary Landrieu (D-La.) voted with the banks and opposed the foreclosure bill. But she plans to support credit card reform, one among many on both sides of the aisle who told the Huffington Post last week they planned to vote for it. Asked if the debate felt different, she said, "Oh yeah."
While the Senate GOP marched in lock step against bankruptcy reform, a sizable number of Republicans will vote for the bill and Sen. Richard Shelby (Ala.), the top Republican on the banking committee, helped craft the compromise proposal.
Dodd's office compiled a summary of the bill, which is posted below. And the full 48-page bill is below Dodd's summary.
THE CREDIT CARD ACCOUNTABILITY RESPONSIBILITY AND DISCLOSURE ACT
Prevents Unfair Increases in Interest Rates and Changes in Terms
• Prohibits arbitrary interest rate increases and universal default on existing balances;
• Requires a credit card issuer who increases a cardholder's interest rate to periodically review and decrease the rate if indicated by the review;
• Prohibits credit card issuers from increasing rates on a cardholder in the first year after a credit card account is opened;
• Requires promotional rates to last at least 6 months.
Prohibits Exorbitant and Unnecessary Fees
• Prohibits issuers from charging a fee to pay a credit card debt, whether by mail, telephone, or electronic transfer, except for live services to make expedited payments;
• Prohibits issuers from charging over-limit fees unless the cardholder elects to allow the issuer to complete over-limit transactions;
• Requires penalty fees to be reasonable and proportional to the omission or violation;
• Enhances protections against excessive fees on low-credit, high-fee credit cards.
Requires Fairness in Application and Timing of Card Payments
• Requires payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest;
• Prohibits issuers from setting early morning deadlines for credit card payments;
• Requires credit card statements to be mailed 21 days before the bill is due rather than the current 14.
Protects the Rights of Financially Responsible Credit Card Users
• Prohibits interest charges on debt paid on time (double-cycle billing ban);
• Prohibits late fees if the card issuer delayed crediting the payment;
• Requires that payment at local branches be credited same-day.
Provides Enhanced Disclosures of Card Terms and Conditions
• Requires cardholders to be given 45 days notice of interest rate, fee and finance charge increases;
• Requires issuers to provide disclosures to consumers upon card renewal when the card terms have changed;
• Requires issuers to provide individual consumer account information and to disclose the period of time and total interest it will take to pay off the card balance if only minimum monthly payments are made;
• Requires full disclosure in billing statements of payment due dates and applicable late payment penalties.
Strengthens Oversight of Credit Card Industry Practices
• Requires each credit card issuer to post its credit card agreements on the Internet, and provide those agreements to the Federal Reserve Board to post on its website;
• Requires the Federal Reserve Board to review the consumer credit card market, including the terms of credit card agreements and the practices of credit card issuers and the cost and availability of credit to consumers.
Ensures Adequate Safeguards for Young People
• Requires issuers extending credit to young consumers under the age of 21 to obtain an application that contains: the signature of a parent, guardian, or other individual 21 years or older who will take responsibility for the debt; or proof that the applicant has an independent means of repaying any credit extended;
• Limits prescreened offers of credit to young consumers;
• Prohibits increases in the credit limit on accounts where a parent, legal guardian, spouse or other individual is jointly liable unless the individual who is jointly liable approves the increase in writing.
• Increases existing penalties for companies that violate the Truth in Lending Act for credit card customers.
Gift Card Protections
• Protects recipients of gift cards by requiring all gift cards to have at least a five-year life span, and eliminates the practice of declining values and hidden fees for those cards not used within a reasonable period of time.
Encourages Transparency in Credit Card Pricing
• Requires the GAO to study the impact of interchange fees on consumers and merchants, specifically their disclosure, pricing, fee and cost structure.