Bankers groups are crying foul as legislators moved today to speed up implementation of credit card reform in the wake of a flood of rate hikes and customer cancellations.
Two powerful legislators –Rep. Carolyn Maloney, D-NY, the author of the credit reform bill, and Rep. Barney Frank, D-Mass., who is Chair of the House Financial Services Committee, announced a proposal Thursday that would require credit card issuers to adhere to the recently passed Credit Card Accountability, Responsibility and Disclosure Act (CARD Act) three months early.
Calling it the ‘‘Expedited CARD Reform for Consumers Act of 2009,” the bill would implement the remaining provisions of the CARD Act on Dec. 1, rather than in 2010 as originally scheduled. That would demand that card issuers abandon “anytime, any reason” changes in terms, hair-trigger interest rate boosts on existing balances and a series of other controversial practices at least three months early, said Nick Bourke, manager of the Pew Safe Credit Cards Project in Washington, D.C. (Most of the remaining changes in credit card rules are slated to go into effect in February; a handful more would go into effect in August of 2010.)
The move was a reaction to a raft of consumer complaints about hiked rates and changing terms in the months following the CARD Act’s passage.
Over the past few months, the nation’s largest credit card issuers, who represent consumers holding 91% of the credit card debt outstanding, have boosted rates by 20%, according to Pew Center research. In addition, they have slashed borrowing limits and cancelled cards on millions of innocent borrowers.
“It’s clear that credit card companies are taking advantage of this period between the signing of my bill and the current effective date,” Rep. Maloney said. “The breadth and depth of the rate hikes happening now point to the need for faster consumer protections.”
Bankers immediately cried foul, saying they needed time to implement the sweeping changes required by the new law.
“Behind every credit card account is a complex network of data systems, risk management systems, pricing mechanisms, and funding sources,” siad Kenneth J. Clayton, senior vice president of card policy at the American Bankers Association. “The reform measures that Congress has already adopted require credit card banks to completely overhaul all of these systems.”
Speeding up the process of revamping these systems would likely cause errors and confusion, he added, and could cause banks to rescind previously approved credit card offers while they attempted to re-assess their risks.
“Changing the implementation date in the middle of a significant process already underway puts credit card customers at risk of not being properly informed,” added Richard Hunt, president of the Consumer Bankers Association, in a prepared statement. “More time is needed to adequately describe these significant changes to customers so they fully understand how their accounts will be managed.”
Has your credit card issuer changed rates or terms in the past few months? Do you support or oppose speeding the implementation of credit card reform? Tell us about it here. Your comments help inform other readers and may provide fodder for future stories.
For more stories about the credit card reform act, see:
Cradle Credit and Soaring Rates to Hit the Skids
Credit Slashed for 33 Million (Mostly Innocent) Borrowers
