Credit card reform

CREDIT CARD REFORM…. It’s been a busy week, and the “Credit Card Accountability, Responsibility, and Disclosure Act” hasn’t gotten much in the way of attention. That’s a shame, because it’s a pretty good bill, which President Obama signed into law this afternoon.

President Obama this afternoon signed into law a bill that prevents credit card companies from raising interest rates arbitrarily and limits the fees they can charge, meeting his own deadline of enacting the bill before Memorial Day.

“With this bill, we’re putting in place some common sense reforms designed to protect consumers . . . ,” Obama said moments before signing the bill in the White House Rose Garden. “I want to be clear about this: Credit card companies provide a valuable service. We don’t begrudge them turning a profit. We just want to make sure that they do so while upholding basic standards of fairness, transparency and accountability.”

He stressed that officials cannot “excuse irresponsibility” by consumers but said too often credit card practices made it very difficult for people to work their way out of debt and the credit cards become “less of a lifeline and more of an anchor.”

The bill, sponsored by Sen. Chris Dodd (D-Conn.), isn’t perfect, but it’s a huge step in the right direction and imposes some limits on the industry that are long overdue.

For example, before a credit card company changes a consumer’s interest rates, fees, or finance charges, the company needs to give 45 days’ notice. Consumers who get an introductory promotional rate get to keep it for at least six months, and interest rates can’t be increased for the first year. There are also specific provisions that help young people and students.

Perhaps most important, companies can’t increase interest rates on existing balances until consumers are more than 60 days behind on payment.

Peter Garuccio, a spokesman for the American Bankers Association, said this week the bill represents “the biggest reforms of the industry since the invention of credit cards.” In this case, that’s a good thing.

What’s more, despite the industry’s influence on the Hill, this was a bipartisan effort. The measure passed the House 361 to 64 (63 of the 64 “nay” votes were Republicans), and passed the Senate 90 to 5 (4 of the 5 opponents were Republicans).

For all of the valid concerns about obstructionism and legislative paralysis, this bill is a pretty significant accomplishment, and something for policymakers at both ends of Pennsylvania Avenue to brag about over the Memorial Day break.