Congress hammers issuers, acquirers spared

On May 19, 2009, The U.S. Senate overwhelmingly approved legislation that would curb fees and interest rate hikes, as well as other practices associated with credit card issuance. The vote was 90 to 5.

In passing SB 414, the Credit Card Accountability Responsibility and Disclosure Act of 2009 (The Credit CARD Act), lawmakers declined to monkey around with interchange.

However, the bill does request that the General Accountability Office study the impact of interchange fees on consumers and merchants. If this provision survives House-Senate negotiations over the bill, the GAO would have 180 days to complete the study.

Interchange up for scrutiny

Specifically, the congressional watchdog agency would be asked to review:

1. The extent to which interchange is disclosed and degree of federal regulatory oversight of the process
2. How interchange affects the ability of merchants of all sizes to negotiate pricing
3. Cost factors that are blended into interchange
4. The impact of interchange on consumer prices

SB 414 passed despite inclusion of a nongermane gun control amendment that would prohibit the U.S. Department of the Interior from banning people who legally possess guns from carrying those weapons onto federal parklands.

SB 414, introduced by Sen. Chris Dodd, D-Conn., codifies regulations adopted last year by the Federal Reserve, calls for quicker implementation of those regulations and adds a few other requirements. Key provisions include sharply restricting card-issuer efforts to raise interest rates on existing balances, limiting certain extraneous fees, imposing new disclosure requirements and banning card issuance to minors.

Efforts by Sen. Bernie Sanders, I-Vt., to cap card rates, as well as a push from merchant groups to include an amendment codifying the right to surcharge credit card payments, were shot down before the bill was passed.

Two bills to meld into one

Similar legislation – the Credit Cardholder’s Bill of Rights (HR 627), introduced by Rep. Carolyn Maloney, D-N.Y. – passed in the U.S. House of Representatives late last month, minus the GAO study and gun rights provisions.

Under congressional rules, a House-Senate conference committee must now work out differences in the legislation before a final bill can be presented to the President. On May 14, 2009, President Obama urged Congress to have credit card reform legislation ready for his signature by Memorial Day (May 25).

Reuters reported May 19 that House Democratic Leader Steny Hoyer, D-Md., said in a meeting with reporters that the House could OK a final version of the bill as early as May 20.

“This is a victory for every American consumer who has ever suffered at the hands of a credit card company,” Dodd said. Dodd has been pushing for credit card reforms for years.

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