Congress Democrats took aim at credit card interest hikes again this week, as Senate Banking Committee Chairman Chris Dodd (D-CT) on Monday introduced a bill aiming to freeze credit card interest rates on existing balances.
Over the past weeks, the debate has heated up about whether or not to move up the effective date of a key provision in the Credit CARD Act, which limits card issuers’ ability to increase interest rates on existing balances. The provision currently does not step into effect until February 22, 2010, and since the Credit CARD Act was signed into law in May, credit card companies have aggressively been jacking up interest rates across the board. Consumers have been hit with interest rate increases on their credit cards going as high as 29.99%; the punitive rate hikes have been levied across the board, even for cardholders who always pay on time.
In an effort to stem the tide of rising interest rates, last week the House Financial Services Committee voted to move the effective date for the new curbs on interest rate increases up to December 1. Fed Chair Ben Bernanke has cautioned against accelerating the enactment of the new law, echoing concerns raised by the banking industry that it would not leave credit card companies enough time to prepare for the new regulations.
The bill introduced by Senator Chris Dodd seeks to bypass those objections by freezing current credit card interest rates, until the remaining provisions in the Credit CARD Act go into effect in February.
“We worked long and hard to enact the safeguards included in the Credit CARD Act,” says Senator Dodd in a statement issued by his office. “And no sooner had it been signed into law, but credit card companies were looking for ways to get around the protections this Congress and the American people demanded. This bill would end those abuses and further protect customers today.”
Kirstin Brost, a spokeswoman for the Senate banking committee, said in a statement to the New York Times that Senator Dodd introduced the idea of rate freezes because “none of the industry’s objections about expediting the provisions of the credit card law applied to a simple rate freeze.” If approved, the Senate bill would freeze the rate on existing balances.
Senator Dodd has been a long-term advocate of credit card reform. He introduced proposals for new credit card legislation in 2004, 2005 and 2008, before the new Credit CARD Act passing it this spring.
