BEIJING, May 24 (Xinhua) -- U.S. President Barack
Obama signed a landmark credit card bill on Friday, a move seen as a major step
toward stabilizing the credit card industry.
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People walk past an ATM on a street in Manhattan, New
York, the United States, April 23, 2009. (Xinhua/Liu
Xin)
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Gallery>>> |
HIGH RISK
Credit card debt for Americans reached more than 945
billion U.S. dollars in March 2009, about 25 percent higher than a decade ago.
As the Untied States is enduring its worst recession
since World War II, its unemployment rate stood at 8.9 percent in April and is
expected to approach 10 percent this year.
The unemployment rate and the credit card charge-off
rate are closely related because consumers who lose their jobs are more likely
to miss payments.
Card loss rates during economic stress generally rise
along with unemployment rate, but bankers at J.P. Morgan Chase and Bank of
America have warned recently that the loss rates could exceed the unemployment
rate in this severe downturn.
Experts predict that the rate of credit-card losses
could eventually surpass the jobless rate because of the compounding effects of
the housing crisis and lackluster consumer confidence.
Some analysts and bank executives say that the
average credit card charge-off rate could top 10 percent later this year, which
means loan losses could reach 70 billion dollars to 75 billion dollars, dealing
another heavy blow to the hard-up banking sector.
In a preemptive move to prevent bubble burst of the
credit card industry, the bill, due to take effect next February, requires that
credit card applicants who are under 21 must prove they can repay the money or
that a parent or guardian is willing to pay off their debt if they default.
PROTECTING CARDHOLDERS'
RIGHTS
The bill severely restricts interest rate increases,
excessive fees and penalties, as millions of credit card holders struggle with
high balances amid a deep recession.
According to the bill, consumers will have to be
notified of rate increases 45 days in advance.
The White House estimates that the industry could
potentially lose about 15 billion dollars in penalty fees each year.
"With this new law, consumers will have the strong
and reliable protections they deserve," Obama said at 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," he said.
"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," he added.
To make up for some of the losses, credit card
issuers could resort to tightening credit limits, raising application standards
and closing accounts. They have also been slashing rewards, increasing interest
rates and boosting fees to prevent further losses.
U.S. House passes credit card bill to
protect consumers
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
U.S. Senate passes credit card bill to
protect consumers
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
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