Credit Card Reform May Be Moved Up
The House and Senate approved credit card reform legislation that was signed by Barack Obama last May. Some of the provisions have already kicked in but one of the main ones, the one in which credit card issuers are required to give their customers 45 days notice of interest rate hikes, isn’t set to go to law until February 22, 2010.
However, led by US Representatives Maloney and Frank that deadline may be pushed up so that the consumer protections go into effect on December 1, 2009. There currently is a bill pending to accelerate the process. US Rep. Barney Frank, the House Financial Services Committee Chairman, has a hearing scheduled on the bill next week.
At heart of this rare move by legislators is the fact that credit card issuers have already begun raising rates on their cardholders ahead of the new reforms kicking in. In addition, card issuers have been aggressive in reducing credit limits on account holders even if they have never then late or missed a payment.
This part of the reform legislation greatly affects those consumers that carry credit card balances from month to month. Millions have already seen their interest rates go up. On average it is reported that the main interest rate is up by 20% since December 2008.
That is in spite of the fact that the Federal Reserve Board has not raised the prime rate. Usually lenders will go in lockstep with the federal reserve as far as making changes to their interest rates because their credit is based off the prime lending rate.
The credit card companies are not fooling anyone with their reasons for raising interest rates and frankly, they’re not trying to. They readily admit that they are raising rates ahead of the reform provision going into effect in order to offset the rising number of defaults and to get ahead of the fact that they will not be able to raise rates whenever it suits them as they have in the past.
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