Speeding up the Card Act

Members of United States Congress are pushing a bill that would make the Credit Card Accountability Responsibility and Disclosure (CARD) Act take full effect at a much earlier date. The proposed legislation is fast becoming into a reality as it gets approval from several lawmakers in Capitol Hill this week.

On May 22 this year, President Barack Obama, signed a federal law which puts more regulation on creditors and banks. It includes limiting late fees and interest rates as well as disallowing card issuers from marketing to students.

Several provisions of the CARD Act were already implemented, but it will not take full effect until February next year. As noted by Sen. Charles Schumer this Sunday, banks are taking advantage of the "grace period" by raising interest rates and drastically cutting credit limits even for consumers who have excellent debt standings.

Legislators found out through an independent research that interest rates went up by 20 percent during the first six months of 2009 while many consumers have seen their credit cards getting cut off for apparently no reason. Several legislators accuse banks of gouging on consumers while raising interest rates on existing balances is not yet banned.

Congress also expressed dismay over what they see as unfair behavior towards consumers as banks employ every measure to maximize profit before February 2010. To stop the practice, legislators are planning to move the effective date of credit card reforms up to December 1 this year.

Early this week, Federal Reserve Chairman, Ben Bernanke, said that such proposals may not work well for the economy, explaining that creditors need sufficient time to adjust to new laws and create new policies within their organizations. He also cited the need for lenders to resolve regulatory and compliance issues as they comply with the regulations.

However, members of the House Financial Services Committee did not take the FTC chairman's advice and voted unanimously to speed up the reforms. Now that the committee vote is already completed, the bet is set to move for a full House vote before reaching Senate.

House representatives say pushing the reforms at a much earlier date is just in time for holidays so Americans can shop and enjoy the season without worrying much about unforeseen interest rate hikes.

Consumer advocacy groups commented that such changes are necessary to help cardholders manage their debts, especially during tough economic times. However, lobbyists for credit card companies say consumers need to learn how to manage debts on their own so they will not get into financial troubles.

Doug Nicholas

Doug Nicholas, a financial consultant by profession with a Masters degree in International Business from Brown University, is also an ardent writer. Though he has a full time job at one of the companies listed on Wall Street, he does manage to squeeze in time to follow his passion. He puts his ideas to words in his articles related to finance and business.