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Legal, Regulatory, and Privacy Issues

Lawmakers will try a second time on credit card legislation


Two New York Congress members are reintroducing the Credit Cardholders’ Bill of Rights. Will the second time around be a winner for credit card practices law?

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It’s Round 2 for Congress and the Credit Cardholders’ Bill of Rights. New York Rep. Carolyn Maloney says she is reintroducing the pro-consumer credit card bill for consideration by the new 111th Congress.

“There is no doubt that credit card companies provide a valuable service and deserve to earn a fair profit, but consumers deserve the right to be able to understand their accounts and be empowered to control them,” Maloney said in a press release issued Jan. 16, 2008. “This bill would give cardholders the information and rights they deserve to make decisions about their own credit.”

The bill passed in the full House of Representatives by a 312-112 margin on Sept. 23, 2008, but did not pass the Senate and never became law. Maloney’s proposed legislation would ban many but not all of the same “unfair or deceptive” practices included in sweeping credit card regulations approved in December 2008 by the Federal Reserve and other federal regulators.

Fed rules
The new Fed regulations will, among other things:

Legislative proposal
Maloney’s bill adds provisions for prohibiting extension of credit to consumers under the age of 18 (unless they are emancipated minors), adding stronger subprime card protections and giving consumers the option of not exceeding their credit limits and incurring over-the-limit fees.

Maloney says the federal rules do not go far enough in protecting consumers and must be enacted sooner to help families currently struggling under the economic recession. The new federal credit card rules do not take effect until July 1, 2010. Maloney’s bill would kick in 90 days after enactment.

Edward Yingling, president of the American Bankers Association trade group, issued a statement decrying the 90-day time period. The new bill “fails to provide sufficient time for banks to tear down the existing structure and build from the ground up a new and improved market system.” Yingling said banks are already working on implementing the Fed rules, which he says “mark the beginning of a new market structure for credit cards.”

He added: “Precipitous action, such as the implementation period in the new bill, could have serious and detrimental effects on consumers and the economy at a time when access to credit is in particular demand.”

Maloney says federal rules do not have the same permanence as law because they are more easily changed. She was joined by a coalition of consumer groups, including Consumers Union, U.S. PIRG and the Consumer Federation of America, in calling for renewed efforts to push the cardholders’ bill of rights.

Second time around

This time, Maloney is joined in her efforts by fellow New Yorker Sen. Charles (Chuck) Schumer. The pair plan to launch dual campaigns for passage of the bill — with Schumer introducing a Senate version (S. 235) while Maloney attempts to shepherd it through the House for a second time. A Senate version of the bill was referred to committee and never advanced before the 110th Congressional session ended in December.

Schumer is a member of the Senate Banking Committee and a longtime consumer watchdog. The “Schumer box” — a table that discloses key financial terms in credit card agreements — is named after the Democratic senator.

Schumer will be joined in his efforts to move the legislation forward in the Senate by Colorado Sen. Mark Udall.

“There has been a long tug of war between credit card companies and consumers — with credit card companies trying to exploit consumers who get in over their heads, and consumers trying to manage their finances the best that they can,” Schumer said in a statement. “It is time that we give the power back to the consumer.”

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