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Credit Card Rates Not Capped

Posted by Jane Akre
Wednesday, May 20, 2009 11:03 AM EST
Category: Protecting Your Family
Tags: Finance, Credit Cards, Senate Banking Committee, Consumer Debt, Interest Rates

Credit card reform is long overdue say the majority of U.S. Senators who approved a reform bill for 2009. 

Credit Card Reform

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IMAGE SOURCE: Wikimedia Commons/ credit card/ author: Channel R 

 

With an average family credit card debt of $7,300 in 2007, credit card reform has long been in the works.

The U.S. Senate passed a bill Tuesday that puts restrictions on abusive practices by credit card companies. 

The CARD Act of 2009 requires credit card companies to give advanced notice of 45 days before raising interest rates, but does not cap rates as many lawmakers had wanted. 

Consumers would have at least 60 days to be behind on a bill before a higher interest rate kicked in and the lender would have to restore the lower rate once the consumer began paying the minimum balance on time for six months. 

Credit card companies would have to mail bills 21 days before they are due, rather than the current 14 days.

"Card issuers raise rates for unclear reasons, use billing methods that consumers do not understand, and assign fees and charges without warning," said Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee tells AP.

The law would also restrict who could get a credit card. Those under the age of 21 would have to prove they can repay the loan or that a guardian will be responsible if they default. 

Credit cards, once thought a luxury, are now an essential part of participating in today’s economy, especially in making large purchases such as a car or house. 

Approved 90-5, the bill also prevents fees added to online payments and requires the lenders to post agreements with credit card accompanies online.

It follows passage of a similar bill by the House last week. Both versions will be reconciled before being presented to President Obama for his signature. 

The Atlantic reports that the varying interest rates just penalize individuals who are a bad risk to credit card companies.  Teaser rates, changes to an already established interest rate, and changes to payment deadlines have many labeling lenders as loan sharks.   

Among five senators opposing the bill include two from South Dakota where thousands of credit card industry jobs are based and could be lost.

Sen. Christopher Dodd said the measure was long overdue but consumers “still must handle their money responsibly and pay their bills on time.”   #


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