WASHINGTON, May 22 (Xinhua) -- In the most sweeping
changes to the U.S. credit card industry in 40 years, President Barack Obama
Friday signed into law a landmark credit card bill that will eliminate sudden
interest rate increases and excessive fees to protect millions of consumers.
US President Barack Obama (C) signs the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act in the Rose Garden at the White House in Washington, May 22, 2009. (Xinhua/Reuters photo) Photo Gallery>>>
Both the Senate and House approved the legislation by
wide margins and with broad bipartisan support earlier this week. As millions of
credit card holders struggle with high balances amid a deep recession, Obama has
been pushing for more actions to give consumers greater protections.
"With this new law, consumers will have the strong
and reliable protections they deserve," Obama said this afternoon before the
signing ceremony.
"We will continue to press for reform that is built
on transparency, accountability, and mutual responsibility -- values fundamental
to the new foundation we seek to build for our economy," said the president.
The legislation prohibits card companies from raising
interest rates on existing balances unless the borrowers is at least 60 days
late paying a bill. If the cardholder pays on time for the following six months,
the company will have to restore the original rate.
The legislation also requires those under 21 who seek
a credit card to prove first that they can repay the money or that a parent or
guardian is willing to pay off their debt if they default.
Consumers would have to be notified of rate increases 45 days in advance.
US President Barack Obama (C) signs the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act in the Rose Garden at the White House in Washington, May 22, 2009. (Xinhua/AFP Photo) Photo Gallery>>>
"We're not going to be giving people a free pass and
we expect consumers to live within their means and pay what they owe. But we
also expect financial institutions to act with the same sense of responsibility
that the American people aspire to in their own lives," said Obama.
Christopher Dodd, chairman of the Senate's Banking
Committee, who authored the law, said that it "cements a victory for every
American consumer who has ever suffered at the hands of a credit card company."
"Many Americans depend on credit cards to get by in
this economy, and today they have won a giant victory that ensures they are
protected from practices that would drive them further into debt, while also
making our economy stronger," Dodd said.
Treasury Secretary Timothy Geithner also said on
Tuesday that the bill will help create "a more fair, transparent and simple
consumer credit market."
Credit card companies, however, have argued that new
regulations may make economic situation even worse by shrinking lenders'
ability, resulting in less credit available to consumers at just the wrong time.
"What has been a short-term revolving unsecured loan
will now become a medium-term unsecured loan, which is significantly more
risky," said Edward Yingling, president and CEO, American Bankers Association.
"It is a fundamental rule of lending that an increase
in risk means that less credit will be available and that the credit that is
available will often have a higher interest rate," he said on Tuesday.
The legislation "is not going to be a hanging for
banks, but I think Congress has collared them and are bringing them in," said
Robert McKinley, founder of CardTrack.com, which consults with banks. "It's been
the Wild West for the card industry for a long time."
Robert hammer, who runs a credit-card consulting
firms, predicted that the new law will subtract 10 billion dollars in revenue
from the industry's overall interest income.
Credit card companies are expected to impose 20.5
billion dollars of penalty fees this year, up from 19.1 billion dollars in 2008.
But analysts warned that many portfolios that are skewed toward late payment
fees, over-limit fees and penalty repricing will be most at risk.
Almost 80 percent of U.S. households have credit
cards. Credit-card debt has increased by 25 percent in the past 10 years,
reaching 963 billion dollars by January, according to figures released by the
White House.
U.S. Senator Christopher Dodd (D-CT)
holds up a copy of a stalled plan for dealing with the current financial
crisis as he hold a news conference at the U.S. Capitol in Washington,
Sept. 26, 2008. (Xinhua/Reuters, File Photo) Photo
Gallery>>>
WASHINGTON, May 20 (Xinhua) -- The U.S. House of
Representatives on Wednesday gave a final approval to a landmark credit card
bill that will eliminate sudden interest rate increases and excessive fees to
protect millions of consumers.
The 361-64 vote, following a 95-5 vote in the Senate
on Tuesday, ensured that President Barack Obama could sign it into law by week's
end. Full story
WASHINGTON, May 19 (Xinhua) -- The U.S. Senate on
Tuesday passed a credit card bill to eliminate sudden interest rate increases
and excessive fees in order to protect millions of consumers.
The 90-5 vote, following a 357-70 vote in the House
last month, made it likely that President Barack Obama could sign it into law by
week's end. Full story
