WASHINGTON — After nearly four hours of fierce partisan bickering, the House Financial Services Committee approved a bill, 48 to 19, on Wednesday to rein in credit card practices.
The bill is expected to proceed to a House vote next week in which Democrats plan to incorporate modifications requested by the Obama administration. It was unclear how many changes the administration wants, but sources said one provision it wants to add would require card companies to allocate payments first to balances with the highest interest rate (The bill would allow card companies to distribute payments evenly across balances).
Though the bill is patterned on regulations from the Federal Reserve Board and other agencies to curb abusive credit card practices, Democrats succeeded in adding an amendment designed to speed implementation of one part of the legislation.
They passed an amendment, 40 to 22, from Rep. Carolyn Maloney, D-N.Y., the primary author of the original legislation, that would require card companies to give 45-day notice of any rate increase. This provision would take effect 90 days after the bill's enactment; the rest of the bill would take effect a year after enactment or June 30, 2010, whichever came first.
Committee Chairman Barney Frank and Rep. Luis Gutierrez urged members to support Maloney's amendment, arguing that notification to consumers of rate changes would be simple to do.
A few weeks earlier, Gutierrez, over Maloney's objections, had succeeded in postponing the bill's effective date to conform better with the Fed's regulations, which take effect July 1, 2010.
Although nine Republicans ultimately supported the bill, several GOP members argued that they thought the issue had been settled already and expressed fear the banking industry would be overwhelmed, given how many changes are already underway.
Frank shot back that Republicans made the same argument when the bill passed in the last Congress. (It did not clear the Senate.)
"We've been hearing this fear that we are rushing things for the last two years," said the Massachusetts Democrat. "I think we are getting into a situation where people are going to say we are rushing it until death do us part."
Though amendments calling for a study usually are considered relatively innocuous, members of both parties fought bitterly over an amendment from Rep. Jeb Hensarling, R-Texas, that would require the Fed to study the card bill's effect. Frank argued that the amendment would undermine the bill by signalling that lawmakers are worried it could have a negative impact. "It's clearly an indication of a bias from those who have a bias against it," he said.
Hensarling said he was baffled that a study without a requirement to make policy changes should cause such a fight.
He argued that, since the Fed has already issued regulations similar to the Maloney bill, it has proven it thinks such reform is the right way to go.
"They protesteth too much," he said. "What are you scared of? If you do not believe the underlying bill would raise interest rates, curtail access to credit … . I am struck that a study would prove to be so controversial."
Hensarling's amendment failed, 38 to 28.
The Maloney bill would ban double-cycle billing, universal default and prolonged payment periods. It would also limit some fees and give extra protections to younger borrowers.
An amendment by Rep. Maxine Waters to study whether financial institutions raise consumer rates based on where they shop passed on a voice vote.
Two other amendments passed by voice vote without fanfare. A bipartisan amendment offered by Rep. Dennis Moore, D-Kan., would give institutions that issue fewer than 50,000 cards flexibility on how consumers can inquire about paying off balances via Internet or toll-free phone numbers. An amendment by Rep. Carolyn McCarthy, D-N.Y., that would simplify disclosures by including opt-outs for over-the-limit fees to be included in monthly statements rather than in separate disclosures also passed.
President Obama and his top economic advisers are to meet today with major card issuers, the card networks and the American Bankers Association.