Legislation
Details of U.S. credit card legislation
Legislation making its way through the U.S. House and Senate aims to restrict the fees and penalties credit card companies can charge consumers.
The House bill, authored by New York Democrat Carolyn Maloney, was approved by the House Financial Services Committee on Wednesday. It next goes to the House floor for debate.
The Senate bill, which has tougher terms, was written by Connecticut Democrat Christopher Dodd. It narrowly was approved by Dodd's Senate Banking Committee and needs the support of at least 60 senators.
Following are summaries of the bills:
Interest Rates
Both the House and Senate bills would bar issuers' interest rate increases on existing card balances and allow retroactive increases only if a cardholder is more than 30 days late, if a preagreed promotional rate expires, or if the rate adjusts as part of a variable rate. It would also require a 45-day notice of all rate increases so consumers can shop for a better deal.
Senate bill would also ban issuers from increasing interest rates and terms unrelated to a cardholder's behavior on that card. It prohibits charging interest on late fees and over-the-limit fees
Penalties
Both the House and Senate bills would end issuers' "double cycle" billing and prohibit cards from charging interest on debt that consumers have already paid on time. If a cardholder pays on time and in full, cards cannot add fees to balances that consist solely of left-over interest.
Fees
House bill would let consumers set their own fixed credit limit and stop card companies from charging "over-the-limit" fees when a preauthorized credit "hold" pushes a consumer over their limit. Card companies would be limited to three over-the- limit fees for the same transaction.
Senate bill would stop issuers from charging more than one over-the-limit fee per billing cycle and would prohibit charging a fee to allow a consumer to pay a credit card debt.
Balances
Both the House and Senate bills -- would stop credit cards from crediting payments to a cardholder's lowest interest rate balances first, a practice making it difficult for a consumer to pay off high-rate debt. Companies would be required to allocate payments proportionally to balances that have different rates.
Due Date
House bill - would require card companies to mail billing statements 25 calendar days before the due date -- up from the current 14 days -- and to credit as "on time" payments made before 5 p.m. local time on the due date.
Senate bill -- requires credit card statements to be mailed 21 days before the due date.
Miscellaneous
House bill - would ban issuing cards to anyone under 18.
Senate bill - would ban issuing cards to anyone under 21 unless they show they can repay the credit extended or complete a certified financial literacy course. It would also require banking regulators to evaluate policies and procedures to ensure compliance.
(Published by Reuters - Apr 22, 2009)