House Passes Bill Imposing New Rules on Credit-Card Industry

From the Wall Street Journal

Obama Expected to Sign Measure Soon

WASHINGTON — The House overwhelmingly approved legislation Wednesday imposing new restrictions on credit-card companies, sending the measure to President Barack Obama to sign in the coming days.

The 364-61 approval, following the Senate’s 90-5 vote Tuesday, will ban several of the industry’s most profitable practices and require clearer disclosure to cardholders about the interest they are paying.

Mr. Obama has pledged to sign the measure, which would take effect in late February 2010. One of the toughest provisions: Cardholders won’t see interest-rate increases on existing card balances unless they are 60 days late on payments. And if the customer pays on time for six months after that, the prior rate must be reinstated.

The new rules also would ban some fees, provide more notice for customers to pay bills and require clearer disclosures. For instance, credit-card statements will have to tell customers how long they would need to wipe out their balance if only paying the minimum each month, and how much interest they would incur along the way.

The legislation will force broad changes in the credit-card business, many of which were under way after the Federal Reserve approved similar — though less stringent — regulations in December. Industry officials say the most stringent elements of the legislation will constrain their ability to adjust prices for the riskiest consumers. Card companies have said they are considering shorter introductory rates, higher interest rates and more annual fees for some consumers as a result of the new restrictions.

By blocking many practices that aggravate consumers, however, lawmakers said the new provisions would help the economy in the long run.

“Consumers will have more money to invest in the economy instead of paying off debt,” said Rep. Carolyn Maloney (D., N.Y.), who co-wrote the legislation.

Over the past year, credit-card issuers have seen their losses mount as customers default on their bills. Many companies have been protecting themselves by raising rates and cutting credit lines in recent months, even for customers who pay their bills on time, at the same time the government stepped forward with expensive bailouts of the financial sector. “It absolutely inflamed the public,” Ms. Maloney said.

The industry found itself isolated on the issue as other business interests — and most Republicans — stepped forward to support the card legislation. But some members warned it could lead to unintended consequences, such as cutting credit to more consumers as card companies aim to protect their bottom lines.

“We don’t need to take away consumers’ credit opportunities at a time when the market is already contracting from the economic recession,” said Rep. Jeb Hensarling (R., Texas), who said he backed the clearer disclosure about terms.

The credit-card bill included an unrelated measure, attached in the Senate by Sen. Tom Coburn (R., Okla.), to allow loaded firearms on federal parks in areas where state and local laws would already allow it. The House carried out an unusual separate vote on the gun provision, which passed 279-147, allowing members to object to it while still putting their names on credit-card legislation.

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