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WASHINGTON — After more than a decade of sponsoring legislation to clamp down on credit card practices, Senate Banking Committee Chairman Chris Dodd is on track to clear the first hurdle toward enactment with a committee vote Tuesday.
The bill would go further than regulatory restrictions on card practices that go into effect next year. Though it is unclear how much support the legislation has, observers said the Connecticut Democrat appears confident he has enough votes to pass it.
"Given the climate of today, you are not bringing anything for a vote that you don't already know is ready to go," said Joseph Mason, a professor at Louisiana State University. "I see no reason right now why this shouldn't go forward, and I think it actually would provide a good rallying point for Senate Banking — something they could actually agree upon, which is at a premium right now."
Most Democrats on the committee are cosponsoring the bill, and since his party a three-seat majority over Republicans, it is easier for Dodd to pass a bill this year.
An open question is whether committee Democrats who are not on the bill — namely Sens. Tim Johnson of South Dakota, Evan Bayh of Indiana and Mark Warner of Virginia — would support it. Also unclear is whether some Republicans could support it, potentially providing a bipartisan push that would give the bill better chances on the Senate floor.
"It looks like he has the votes, but you never know until the day" of the vote, said Travis Plunkett, the legislative director for the Consumer Federation of America. "It's a controversial issue. The banking industry still has enormous power with Congress."
Dodd's bill would go further than the card regulations finalized by the Federal Reserve Board and other regulators, which would define several common practices like double-cycle billing and universal default as unfair or deceptive. It also goes further than a bill by Rep. Carolyn Maloney, D-N.Y., which the House Financial Services financial institutions subcommittee has tentative plans to vote on Wednesday. Her bill, which cleared the House last year, would expand upon the Fed's card rules and speed up the implementation of reforms to 90 days after enactment.
The regulators' rules would not go into effect until mid-2010, and Sandra Braunstein, the director of the Fed's division of consumer and community affairs, said at a subcommittee hearing last week that it would be practically impossible for card issuers to update their systems in less than 18 months.
But Dodd's bill would take effect immediately and includes provisions designed to protect college students from card debt. It would require issuers to ensure that borrowers under 21 have the ability to repay, have a parent co-sign or pass a credit counseling course.
Unlike the Fed proposal, Dodd's bill also would add several fee restrictions. It would ban charging interest on fees, prohibit fees to pay bills and restrict over-the-limit charges.
The banking industry vowed Thursday to keep fighting the legislation.
"Any time you apply such rigid parameters as those contained in this bill to an industry as competitive as credit cards, you're going to disproportionately burden the smaller players in the market," said Jason Kratovil, a vice president of government relations with the Independent Community Bankers of America. "Community bankers want to offer cards but are going to find it difficult in such a restrictive environment. … Consumers will be left with fewer choices, and the cost of credit for all borrowers will likely go up."
Consumer groups argued the bill was long overdue.
"It shows that credit card reform is a top priority for both houses of Congress," said Plunkett.
Though Dodd has long sponsored card legislation, with the Fed rules already finalized and most of Washington focused on modernizing financial regulation, some have questioned whether his interest in tough consumer legislation is driven in part by his own political problems. He is facing an unusually tight re-election race next year, and he has been accused of being too close to the financial players that caused the crisis.
"His political problems back home could be playing a role in moving the legislation at this time," said Andy Laperriere, a managing director of International Strategy and Investment Group Inc.'s policy research team.
James Barth, a Lowder Eminent Scholar in Finance at Auburn University and a senior fellow at the Milken Institute, said a win on card reform could help Dodd politically. "He's been hammered by just about everybody," Barth said. "One would expect a politician to do the sort of things that garner support — and hopefully, at the time of election, more votes than would otherwise be the case — so that certainly would not be unexpected, and there is nothing inappropriate about it."
An aide to Senate Majority Leader Harry Reid, D-Nev., said the Senate would like to take up card legislation. "It is an important consumer issue that we would like to consider at some point."
