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U.S. Reps. Carolyn Maloney, D-N.Y., and Barney Frank, D-Mass., yesterday introduced legislation that would force credit card issuers to comply with key parts of the Credit Card Accountability, Responsibility and Disclosure Act three months earlier than previously required under the law. The goal in moving up the deadlines is to prevent issuers from raising cardholders' interest rates unfairly, says Maloney, a co-sponsor of the House bill that helped spawn recent card-industry reforms. The Expedited CARD Reform for Consumers Act of 2009 Maloney and Frank introduced would amend the CARD Act, which President Obama signed into law in May, so that the effective date of most of its provisions would be Dec. 1, 2009, instead of Feb. 22, 2010. "It's clear that credit card companies are taking advantage of this period between the signing of my bill and the current effective date," Maloney said in a statement, citing a Pew Charitable Trust report stating that interest rates in recent months have spiked by an average of 200 basis points on credit cards. "The breadth and depth of the rate hikes happening now point to the need for faster consumer protections. Americans need relief now," Maloney said. The law that passed in May prevents issuers from raising cardholders' interest rates or other finance charges on outstanding balances, except where the rate is variable, when a promotional rate has expired or a cardholder is at least 60 days late in making a minimum payment. Any penalty rate increase must be terminated if the cardholder makes six subsequent on-time payments. Another provision of the law, which is slated to go into effect Aug. 22, 2010, requires that all increases in cardholders' interest annual percentage rates after Jan. 1, 2009, be reviewed every six months to determine whether a rate decrease is justified or whether the factors triggering the increase still exist. The American Bankers Association said in a statement that issuers are working diligently to comply with the existing deadlines, and it would be "extremely difficult, if not impossible, for them to meet the new deadline contemplated by this bill." Forcing issuers to rush to meet earlier deadlines ultimately could hurt consumers by restricting the availability of consumer credit offers, the association said. Cardholders already are protected by one provision of the new law that went into effect last month that requires issuers to give a 45-day warning of any potential interest rate change, giving customers a chance to opt out and pay off their loans at the existing rate, the banking group noted. "This provision ... raises the real question of whether further action [to expedite deadlines] is necessary given the downsides for consumers," the association said.
