A major power play is underway in Congress that will determine how soon you will get relief from abusive credit-card practices.
The roundabout tussle pits U.S. Rep. Barney Frank, Democratic chairman of the House Financial Services Committee, against Ben Bernanke, chairman of the Federal Reserve Bank. Bernanke yesterday came to the defense of banks opposed to speeding up implementation of the Credit Card Accountability Responsibility and Disclosure Act, set to take effect Feb. 22 nine months to the day after its passage.
The new law limits banks’ ability to hike interest rates and bans such practices as “universal default,” in which lenders boost rates on borrowers who are timely on payments, but in arrears with other lenders. In a letter dated Oct. 20 to Rep. Spencer Bachus of Alabama, the top Republican on the committee, Bernanke cautioned against moving the effective date of rules to Dec. 1 as Frank proposes.
“Issuers must be afforded sufficient time for implementation to allow for an orderly transition and to avoid unintended consequences, compliance difficulties and potential liabilities,” Bernanke wrote. The Fed chairman was responding in advisory capacity to questions from Bachus, but his considered opinion will serve as fodder for lawmakers opposed to hastening the law’s enactment.
The bill, which passed both chambers of Congress with broad, bipartisan support, imposes widespread reforms that protect cardholders from arbitrary rate increases, outlaw rate hikes on timely payers, require billing statements to be mailed at least 21 days before their due date and prohibit lenders from charging excessive fees.
Frank wants to move up the start date because he says lenders have abused the extended grace period before the law’s implementation to hike rates on millions of borrowers. “It is very clear that this is the kind of protection that shouldn’t wait and we should move forward,” Frank said in an Oct. 8 hearing.
Of course, the difference between the two timetables would put the new rules’ enactment before, or after, the upcoming holiday-shopping season. If you take any retailers up on their cashiers’ store-card pitches at the register, bear in mind you may or may not have the new protections to count on just yet.
