WASHINGTON (Reuters) - A key U.S. Senate panel on Tuesday backed proposals to reform credit card practices and increase the authority of regulators to borrow from the Treasury Department to deal with a slew of expected bank failures.
By a 12-11 vote, the Senate Banking Committee narrowly approved a bill aimed at cleaning up unfair and deceptive practices by credit card companies criticized for surprising customers with fees and unilaterally changing terms.
The bill, which was introduced by the committee’s chairman, Christopher Dodd, also contains two provisions aimed at increasing the borrowing authority of regulators, the Federal Deposit Insurance Corp and the National Credit Union Administration.
The provisions, introduced by Republican Senator Mike Crapo of Idaho, would increase the FDIC’s borrowing authority to $100 billion from the current $30 billion to deal with banks and increase the NCUA’s limit to $6 billion from $100 million for nonprofit credit unions.
The provisions also allow the agencies to exceed the new limits through the end of next year for up to $500 billion for the FDIC and $18 billion for the NCUA in the event of extraordinary circumstances.
Rep. Barney Frank, chairman of the House Financial Services Committee, said the panel is working on similar legislative goals. Both chambers of Congress are controlled by Democrats.
Both of Crapo’s provisions were tucked into the comprehensive credit-card bill, which drew criticism from the American Bankers Association industry trade group.
Kenneth Clayton, senior vice president for card policy at the ABA, warned that credit card companies might be forced curtail the amount of credit made available to card holders.
“It is essential that policymakers strive to find a way to address perceived ills in the marketplace while not unnecessarily curtailing access to reasonably-priced credit,” he said.
The committee’s second-highest ranking Democrat, Tim Johnson, voted against the legislation. Johnson’s home state, South Dakota, is among several states with big credit card operations.
The panel’s action marks a first for credit card reform in the Senate, a move applauded by consumer groups unsatisfied with recent rules adopted by the Federal Reserve. It also gives lawmakers, including Dodd who faces reelection next year, a pro-consumer legislative item to tout to their constituents.
It was not known when the full Senate would vote on the bill, called the Credit Card Accountability, Responsibility and Disclosure Act.
The credit card bill is co-sponsored by Carl Levin of Michigan, who as chairman of the Senate permanent subcommittee on investigations has criticized the card industry’s practices.
A House subcommittee is expected to take up its own credit card bill on Wednesday.
Reporting by John Poirier; editing by John Wallace and Andre Grenon