Barney Frank Moves to Push Credit Card Rules on Banks Early

U.S. Reps. Barney Frank (D-Mass.) and Carolyn Maloney (D-N.Y.) have proposed legislation seeking to move up by more than two months the effective date of Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), commonly known as the Credit Cardholders Bill of Rights.

The law, signed by President Obama at the end of May, included several restrictions for credit card companies in terms of rate changes and billing procedures. The first rules of the legislation are not slated to take effect until February 22, 2010. Other parts of the legislation will not take effect until August 2010.  But the Expedited CARD Reform for Consumers Act of 2009, authored by Frank and Maloney, seeks to move up the date of enactment to Dec. 1.

The House Financial Services Committee, which Frank chairs, is scheduled to take up the new legislation Thursday.

Among the changes in the law:

• No interest rate increases during the first 12 months of opening a credit card, unless the rate increase was disclosed when you first opened the credit card.
• Promotional rates must last at least 6 months.
• No interest rate increases on pre-existing balances. If the credit card issuer decides to increase your interest rate, that new rate would only apply to new balances. The current balance would continue to be subject to the old interest rate. There’s an exception, however, if the cardholder becomes more than 60 days late on your credit card payments.
• Credit card issuers must give a 45-day advanced notice before increasing your interest rate or making any major change to your credit card agreement.

Many card issuers have already instituted many of these changes and changed fee structures by raising interest rates, canceling cardholder accounts and reducing rewards programs. For example, Discover Card’s current promotion on 5 percent cash rewards on grocery store purchases is capped on the first $400 of purchases. After the cap is reached, card members receive unlimited rewards up to one percent.

But Tuesday, Bank of America  issued a strong statement intended to stave off the accelerated implementation of the CARD Act. The major credit card issuer vowed not to raise interest rates between now and February, when the changes are slated to take effect. Cardholders could still see their interest rates increase, however, if their cards carry variable rates tied to the prime interest rate.