A quarterly survey of banks by the Fed found that card issuers will likely increase rates, reduce credit limits and hike annual fees in response to the credit card reform laws. They will take these actions for both prime borrowers — those with above average credit histories – and the higher-risk borrowers with poor or tainted credit, the Fed said.
The House voted 331-92 today to immediately begin the enforcement of tough new credit card legislation that is scheduled to take full effect in February, but the measure’s prospects in…
A study of 400 credit cards offered by the top banks found practices that will be outlawed once credit industry reform laws take effect in February of next year, according to the Pew Charitable Trusts, the independent nonprofit.
The organization’s Safe Credit Cards Project issued the report today, which also found that advertised credit card interest rates rose an average of 20 percent in the first two quarters of 2009, even as banks’ cost of lending declined.
The call for a freeze, seen as a drastic political move by some, comes in the wake of Congressional uproar over the hiking of rates by some card issuers before new credit card reform takes effect in February. A key House panel last week voted to push up the start-date of the new laws to Dec. 1.
Despite a written objection by Fed Chairman Ben Bernanke, the House Financial Services Committee voted today to push up the start of sweeping credit card reform by two months, from Feb. 1 to Dec. 1. The lawmakers cite the actions of some card companies ahead of the new laws, including the raising of interest rates, the lowering of credit limits and the cancellation of under-used accounts, even for card users with good credit.
Moving up the start-date of sweeping new credit card reform laws could cause hardship to small credit issuers, U.S. Federal Reserve Chairman Ben Bernanke has said in a letter to a House lawmaker. Bernanke also said companies need to have sufficient time “to allow for an orderly transition and to avoid unintended consequences, compliance difficulties and potential liabilities.”
U.S. Rep. Barney Frank is putting out a warning to credit card issuers: don’t abuse the grace period between now and the February 2010 take-effect date of reform laws that will restrict how and when issuers can raise rates or modify consumer policies. Frank, who chairs the House Financial Services Committee, is leading the charge among a group of U.S. lawmakers to push up the enactment date of the reform legislation to Dec. 1 from Feb. 22, 2010.
New reform aims to ban unfair rate increases and “fee traps,” among other practices targeted by Congress and the Obama Administration. The law will ban rate increases on existing balances due to “any time, any reason” or “universal default” and severely restricts retroactive rate increases due to late payment.
Cardholders now have 45 days to reject proposed rate increases. Consumers who opt to reject a rate increase within 45 days will have two options at the bank’s discretion.
Some credit card issuers have raised interest rates, minimum payments due and lowered credit limits ahead of new laws that take full effect in February 2010.