House panel backs curbs on credit card practices
WASHINGTON (Reuters) - Legislation aimed at curbing credit card billing practices that surprise borrowers with unexpected interest rate increases and fees was approved on Thursday by a U.S. House of Representatives committee.
The bill approved by Financial Services Committee mirrors Federal Reserve proposals that would effectively end double-cycle billing -- in which card companies reach back to prior billing cycles to help calculate the interest charged in the current cycle.
"We overcame a huge hurdle today," said New York Democratic Rep. Carolyn Maloney, chief sponsor of the bill. "This is the first time a congressional committee has ever passed consumer protections for credit cardholders."
Maloney's bill also seeks to give cardholders more time to pay by forcing card companies to mail bills 25 days before the due date instead of the current 14 days. The measure would also ban the issuance of cards to teens and minors.
The 39-7 vote in the Democrat-controlled committee was mostly along party lines. Two Republicans voted for the bill.
Banks, reeling from the housing market-induced credit crisis, oppose the bill which could limit the revenue they generate from card holders.
But it is unclear if credit card legislation can make it through Congress this year with the legislative session shortened by November elections. Several Senate proposals have been offered.
Critics of the bill on the committee said Congress should not preempt the Fed and other banking regulators considering their own proposals.
They also warned that if some fees are banned, the industry is likely to come up with new ones. "If you press in one side of the balloon it pokes out on another side of the balloon," Texas Republican Rep. Jeb Hensarling said.
Among the biggest issuers of Visa Inc and MasterCard Inc credit cards are Bank of America Corp, JPMorgan Chase & Co, Citigroup Inc, Capital One Financial Corp and Discover Financial Services.
The American Bankers Association trade group expressed disappointment with the committee action.
"The result will be higher costs for consumers, reduced access to credit for those with an imperfect or limited credit history, and less access to low credit options," ABA President Edward Yingling said in a statement.
Rep. Barney Frank, the Massachusetts Democrat who chairs the committee, said he feared banks would try to water down the Fed's proposals and stressed that members should not abandon their responsibility to legislate.
The public comment period for the Fed's proposals ends Monday.
In the Senate, Illinois Democrat Dick Durbin has introduced a bill that would cap interest and all charges on credit card transactions at 36 percent, similar to a 2006 law passed to protect military service members.
The credit card industry is battling Congress on other fronts this year.
Visa and MasterCard face legislation aimed at forcing them to negotiate with big and small retailers over the fees charged to merchants every time a card is used at a store.
The charges, called interchange fees, have been the focus of hearings by the House Judiciary Committee which approved a bill giving retailers ranging from big oil companies to small stores stronger negotiating powers.
(Editing by Tim Dobbyn)
