WASHINGTON – The House Financial Services Committee voted last night to ban a variety of credit card practices, most of them targeted at low-income cardholders, but action on the bill was too late for passage in this Congress.
The bill endorsed by the Committee would ban so-called double cycle billing; universal default, payment allocations and retroactive rate increases, among other things.
The credit union lobby is unenthusiastic and has major reservations with the bill, especially to a handful of key provisions, and called on lawmakers to wait until later this year when the Federal Reserve is expected to issue its own credit card reforms, as part of amendments to Regulation Z, the Truth in Lending Act.
But the Committee was unrelenting. "Congress is written into the Constitution, the Federal Reserve is not," said Rep. Carolyn Maloney, D-N.Y., the chief sponsor of the bill, during yesterday’s debate.
The credit union lobby said credit unions do not engage in most of the bill’s prohibited actions, but they oppose several provisions.
NAFCU said it opposes the new limits on retroactive rate increases, which some creditors assess on outstanding balances on cards after an adverse credit incident. NAFCU told Maloney in some cases rate increases may be necessary to protect the credit card portfolio, such as in times of rising interest rates.
CUNA said it opposes a requirement for a 45-day advance notice of a rate increase–compared to the current 15-day notice.
CUNA also opposes a provision requiring that creditors mail bills at least 25 days before the bill due date. They said a 21-day date would be better.
Both NAFCU and CUNA oppose a provision prohibiting issuing a card to anyone under 18 unless that person has been legally emancipated. They suggested the prohibition be lifted for anyone who has the approval of a parent or guardian.
The bill, which must now be voted by the full House, has little chance of passing this year, as a similar bill has been stalled in the Senate. "This is not going to go through the United States Senate. The Senate has completed its business for this year," said Rep. Barney Frank, D-Mass., chairman of the Financial Services Committee, and a supporter of the bill, during yesterday’s debate.
But the chief sponsors in the House and Senate are expected to bring the issue back again in the next Congress, where they are expected to attract more support. That is because the Democrats, where most of the support exists in both the House and Senate, are widely expected to have a broader majority in both chambers next year.
