Credit card companies scored a win over consumers who are lobbying against recent hikes on credit card interest rates, with Republican Senators blocking the passage of an amendment that will put a freeze on interest rate increases. On a move that is expected to infuriate the already battered consumers, Senate Republicans refused to sign the proposed legislation that will order credit card companies to stop raising credit card fees. With Republicans unwilling to cooperate, there is little chance that this new bill would see the light of day.
This amendment to the CREDIT Act, sought for an earlier implementation of the said bill, in response to public outcry over successive credit card rate hikes recently imposed by card issuers. The failed amendment was co-authored by Senators Mark Udall and Chairman of the Senate Banking Committee, Chris Dodd.
The CREDIT Act which will take effect on February 2010 imposes strict guidelines over interest rate and fee hikes. Under the said bill, card issuers can only raise interest rates on existing credit card debt for cardholders who have been behind in payments for more than 60 days. On the other hand, if for some reason credit card companies are forced to hike fees, they are required to inform customers 45 days in advance.
When the CREDIT Act was signed into law May this year, credit card companies scrambled to take advantage of the time they have left and imposed steep increases in interest charges. Many consumers were caught off guard by insurers' sudden fee upgrades. In a recent phone survey conducted by Rasmussen Reports, 50% of respondents reported getting recent rate increase notices from credit card companies. The real number could actually be higher since almost 20% of those surveyed were not aware if their credit card fees had been increased or not. Only 31% of those interviewed in this survey said that their credit card fees had not been increased.
In a speech, Senator Dodd expressed his displeasure over the recent decision of card issuers to jack up card fees in anticipation of the implementation of the CREDIT Card Act. He added that concerned companies are taking advantage of the time they have in their hands to impose interest rate hikes, thereby increasing the financial burden of an already troubled American public. The country is still suffering from the effects of this recession, with businesses downsizing and people getting laid off in alarming numbers.
In November, the Senate came up with a proposal to amend the CREDIT Card Act, pushing its implementation date earlier than its original date of enforcement. However, Republican Senators were not enthusiastic about the proposed changes and unanimously placed a hold order on the bill.