The Senate has reached a compromise in advance of President Obama’s credit card town hall this Thursday to limit the deceptive practices of credit card issuers. Here are the key elements of the bill. Should it pass, the rules will go in effect nine months after it is signed as opposed to the original date of July 2010:
-Repeals punitive interest rates after six months of customers paying on time
-Limits interest rate hikes for previous purchases unless customers fall 60 days behind
-Prohibits rate increases during the first year a card is open
John Ulzheimer calls the Senate bill a surgical approach to the problem and should allow both lenders and consumers alike to take more control over the terms. If the bill becomes law, people will be able to earn back their good rates instead of being punished forever when they fall behind.
But with the good news comes the bad. New research shows that top eight credit card issuers – who control 80 percent of the balances in the country – are still practicing the same manipulative practices that they eventually will be forced to abandon, such as applying payments to cheaper balances and raising interest rates indiscriminately. It seems that, according to Ulzheimer, the credit card companies are resigned to the fact that they’re going to be forced to change their ways and are just giving the public one final squeeze before the law forces their hands.
The odds of preemptive self-regulation, while a good PR move, still seem about as low as many of our credit card limits right now.
Stay with OTM for updates on the credit card regulation as it moves through Washington.