House Panel Approves Card Measure
The measure, which the full House could take up this week, bans interest rate hikes on existing balances, over-the-limit fees and double-cycle billing. Cardholders could avoid a higher rate by canceling the card before the rate takes effect.
It passed 48-19. The House bill is very similar to rules approved last year by the NCUA, the Federal Reserve and other regulators that would go into effect July 1, 2010.
CUNA and NAFCU supported parts of the measure but expressed concern that it would harm the ability of their members to manage risk, and thus decrease the availability of credit.
CUNA and NAFCU both said they support the idea of expanding consumer rights, but took issue with a provision requiring a 45-day notice of rate changes and another mandating that creditors set up a system so consumers can notify them if they want to opt-out of credit authorization for over-the-limit transactions if fees are involved.
The bill would take effect July 1, 2010, the same day the regulations approved by the NCUA take effect. However, the requirement for a 45-day notice for rate changes would take effect 90 days after the bill is signed into law.
Both CUNA and NAFCU supported an amendment that passed in the committee last week that exempts small credit card issuers-such as some credit unions and community banks-from having to post Internet notifications of certain information to consumers if they don't operate a Web site.
Small issuers-defined as institutions with fewer than 50,000 credit card accounts-would have the flexibility to provide either a Web site or a toll-free phone number for their customers to comply with the requirements in the bill.
The Senate Banking Committee passed a more comprehensive measure last month, but negotiations between both parties are continuing before it comes up for a vote on the floor.
The Senate bill bans increasing rates on existing balances and bans contracts allowing issuers to change rates for any reason.
CUNA Vice President of Legislative Affairs Ryan Donovan said that generally "the bill will be helpful to consumers and not harmful to credit unions, because it doesn't add any regulatory burdens that aren't already going to take effect through the regulations."
But he expressed concern that the bill could be changed on the House floor or during negotiations with the Senate in ways that could hurt credit unions, including an amendment requiring credit card issuers to negotiate with merchants and retailers for the fees paid on credit card transactions.
Credit card debt is an issue of concern to the Obama administration. Last Thursday, President Obama and his top aides were scheduled to meet with executives of credit card companies to discuss ways to decrease the addiction of consumers to credit cards.