Congress moves to expedite the implementation CARD Reform Act
United States House Financial Services has approved a proposed bill expediting the implementation of CARD Reform for Consumers Act of 2009, a law which overhauls the credit system that is supposed to be carried out on February 2010, on December this year.
On the other hand, the HR 3639, the Expedited CARD Reform for Consumers Act of 2009, does not apply to prepaid gift cards – which are already printed and will be out in the market soon, and small credit card issuers – which control less than 2 million cardholder accounts. The credit reform law will be effectively implemented on small market such as these on February 22, 2010.
Meanwhile, Senate Banking Committee Chairman Sen. Chris Dodd recommended the immediate termination of increased interest rates set by the card issuers.
These actions by both legislative houses were prompted by the continued increase of rates for 700 million credit card holders.
Comparing last year’s rates, cardholders complained that they have been paying four times higher in interest rates due to charges on late payment and other additional fees.
In a recent study conducted by Pew Charitable Trust, a non-government organization which is committed to serve the people by improving public policy through information dissemination, they found out that contracts for almost 400 cards, issued by banks and 12 largest credit companies, allow card issuers to raise interest rates, apply penalty fees for late payments or over-limit transactions.
These terms are the same policies prohibited under the CARD Reform Act, which was signed into law by President Barack Obama early this year. The Congress has divided the implementation of the law into two phases to give credit card companies more time to change their policies. The first phase, which was implemented last August, entitles the consumers a 45-day notice from the card companies and banks before changing their interest rates. The second and last phase, which is supposedly carried out next year, bans the card issuers to increase their interest rates on existing balances. The law also gives the consumers five years to pay the loan that has fixed interest.
However, instead of adjusting their policies to meet the reform act requirements, the banks, which control more than 90 percent of credit cards in the marker, and credit card companies have changed and rewrote contracts to their advantage. As a result, credit card issuers have free-hands in increasing their interest rates and eventually raking more profits at the expense of their consumers.
In fact, the credit card companies have started increasing the median annual rate in December 2008 and July this year by two percent or more – one of the measures that will cover the projected losses due to continued climbing of unemployment rate and the implementation of CARD Reform Act.
Other measures adopted by banks and credit card companies are re-pricing program which is forcefully employed to its existing consumers, some of them have cut their rewards programs, and applying additional charges for annual fees, between $29 to $99.
Writer: Gani
Tags: barack obama, cardholders, charitable trust, chris dodd, committee chairman, consumers act, contracts, credit card holders, credit card issuers, february 22, financial services, gift cards, government organization, information dissemination, interest rates, late payments, legislative houses, public policy, reform act, senate banking committee
- Tips for Safe Driving in the New Year’s Eve
- Fed Implements Rule to Protect Credit Card Users
- Federal Reserve to Implement New Credit Card Rules
