Law Limiting Credit Card Fee Abuse Enacted

     WASHINGTON (CN) – President Barack Obama on Friday signed into law legislation that imposes new rules on fees and interest rates charged by credit card companies. “One in five Americans carry a balance that has been charged interest rates above 20 percent,” Obama said.

     “Over the past decade, credit card debt has increased by 25 percent in our country,” Obama iterated, and array of senators and representatives at his side. “Nearly half of all Americans carry a balance on their cards. Those who do, carry an average balance of more than $7,000.”
     The problem is that, “Contracts are drafted not to inform, but to confuse,” he said. “Mysterious fees appear on statements. Payment deadlines shift. Terms change. Interest rates rise.”
     The new rules ban retroactive rate increases, and ensure that promotional rates last at least six months before the higher, non-promotional rates kick in.
     Called the Credit Card Accountability, Responsibility, and Disclosure Act, the legislation also cuts down on fee traps where people are charged unexpected and unexplained fees.
     Card holders will now have a full 21 days to pay from the time their bills are issued, instead of only 14 days, giving card holders more time to examine their bills. In addition, payment deadlines that otherwise fall on a weekend or holiday will be extended until the end of the day.
     The legislation would also halt the use by banks of artificial deadlines where a bank would credit bills paid in the morning post to the same day and credit those received in the afternoon post to the following day and therefore assess a penalty. Under the new rules, payments delivered any time during the day will be credited to that same day.
     “And this law ends the practice of shifting payment dates,” said Obama in touting the leed. “This always used to bug me, when you’d get like suddenly it was due on the 19th when it had been the 31st.”
     The law also sets up new measures of accountability.
     “We require at least 45 days notice,” said Obama, “if the credit card company is going to change terms and conditions.”
     Card issuers will need to post contracts online for easy government regulation, and the regulators will conduct an annual report to Congress.
Card issuers will also face tougher penalties for violations than under past laws.
Obama also touted the plain language provisions of the bill. Card issuers will need to make clear billing statements, and provide periodic reports on how long it would take to pay off the existing card balance, as well as the total interest cost if the consumer were to pay the minimum fees.
     In a phone interview, David Henderson, a research fellow at the Hoover Institute, a conservative think tank, said the measure represents “further government intrusion in contractual relationships.”
     The act, he said, is not necessary.
     “People who wanted to know what the various rules were and so on could know that if they really wanted to,” he said.
     He described how the act “will make it less attractive to lend to high risk people.” If issuers can’t adjust their rates, he said, they will be more careful in giving out cards.
     Before Obama signed the bill, he made clear in his speech that the act is “not going to give people a free pass. We expect consumers to live within their means and pay what they owe.”
     “Some get in over their heads by not using their heads,” he preached. “We do not excuse or condone folks who’ve acted irresponsibly.”
     He also reminded listeners that the measure is not intended to punish credit card issuers. “Credit card companies provide a valuable service,” he said. “We just want to make sure that they do so while upholding basic standards of fairness, transparency, and accountability.”

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