WASHINGTON — Riding a crest of populist anger, the House on Thursday approved a bill to restrict credit card practices and eliminate sudden increases in interest rates and late fees that have entangled millions of consumers. The legislation, dubbed the Credit Card Holders' Bill of Rights, passed by a bipartisan vote of 357-70 following lobbying by President Barack Obama and members of his administration.
The measure would prohibit so-called double-cycle billing and retroactive rate hikes and would prevent companies from giving credit cards to anyone under 18.
If they become law, the new provisions won't take effect for a year, except for a requirement that customers get 45 days' notice before their interest rates are increased. That would take effect in 90 days.
Similar legislation is before the Senate, where it could be taken up as early as next week.
"This is a unique opportunity to end abusive practices that afflict millions of families across the nation, to contribute to our economic recovery, and to take a stand for American consumers," Sen. Christopher Dodd, chairman of the Senate Banking Committee and the bill's primary sponsor, said after the House vote. "Now it is the Senate's turn to act."
Consumer advocates and some Democrats have unsuccessfully sought for years to bring new rules to the industry.
Supporters want to put a final congressional package under Obama's eager pen by the Memorial Day holiday. They acknowledged, though, that House passage of the measure was an opening salvo and a lengthy legislative slog lies ahead, in which industry interests could prevail in getting restrictions weakened.
"The administration supports Congress' efforts to ... provide additional strong and reliable protections for consumers that ban unfair and abusive practices," the White House said in a statement following the House vote. "The nation's credit card system must have more accountability, including more effective oversight and more effective enforcement of credit card issuers who violate the law."
Obama's engagement in the issue diverged sharply from his handling of a plan to spare hundreds of thousands of homeowners from foreclosure through bankruptcy, which met defeat in the Democratic-controlled Senate Thursday on a 45-51 vote. Obama had embraced the plan, but facing stiff opposition from the banking industry, he did little to pressure lawmakers who worried it would encourage bankruptcy filings and catapult interest rates higher.
Before approving the credit card bill, the House adopted a series of amendments _ some of which were pushed by the White House _ that amplified the restrictions on industry practices.
The House measure incorporates Federal Reserve regulations due to take effect in July 2010 but goes further by adding restrictions for credit cards for college students as well as other changes. Payments made by card holders that exceed the minimum monthly level would have to be applied first to the portion of the remaining balance with the highest interest rate, and then to any other balances in descending order.
Consumers would have to be notified 30 days before their accounts are closed.
Double-cycle billing eliminates the interest-free period for consumers who move from paying the full balance monthly to carrying a balance.
Opponents tried vainly on the House floor to temper a fast-moving bill with amendments that would have given credit card issuers some openings to raise rates within the proposed restraints.
"We shouldn't take credit opportunities away," said Rep. Jeb Hensarling, R-Texas. "I just want consumers to have choices. I want there to be a competitive marketplace."
Hensarling and other Republican opponents endorsed the bill's requirements for clearer disclosure in the fine print of credit card agreements. But they said the legislation overall could prompt lenders to restrict credit in an already tight market to compensate for the new requirements.
That's the leading argument made by banking industry executives against the legislation.
Edward Yingling, president and CEO of the American Bankers Association, said the group "strongly believes that any additional legislative efforts should strive to achieve the right balance between enhancing consumer protection, and ensuring that credit remains available to consumers and small businesses at a reasonable cost."
"We continue to believe that more work needs to be done to achieve that balance," he said.
Supporters of the bill also drew on the economic crisis to make their case.
"Americans deserve a fair shake," said Ed Perlmutter, D-Colo. The credit card industry "has taken advantage of millions of vulnerable Americans."
Rep. Carolyn Maloney, D-N.Y., the bill's chief sponsor, said the changes were needed because "many people are turning to their credit cards because they have lost their jobs."
The bill's boosters are tapping into public anger over corporate excesses and the conduct of banks and other companies receiving billions of dollars in taxpayer money.
"At a time when millions of families continue to struggle to make ends meet, additional safeguards are needed to ensure consumers are not being saddled by questionable industry practices," the powerful AARP, the lobbying group representing seniors, said in a statement supporting the bill.
Obama met at the White House last week with executives of the credit card industry and made clear he wants to sign a bill into law. And a day before the House vote, Treasury Secretary Timothy Geithner convened a meeting with Maloney and representatives of consumer and civil rights groups.
"We need new commonsense rules of the road to establish a more fair, transparent, simple consumer credit market," Geithner said in a statement issued Thursday. "This bill is a major step toward that goal."
The administration is advocating stricter practices that could crimp banks' revenue at the same time the government is shoring up the financial institutions with hundreds of billions of dollars in bailout aid.
The credit card changes could cost the banking industry more than $10 billion a year in interest payments, according to a study by the law firm Morrison & Foerster.
Amid the recession and rising job losses, consumers _ even those with strong credit records _ have been defaulting at high levels on their credit cards. Banks already battered by the mortgage and credit crises have been bleeding tens of billions in red ink from the losses.
U.S. credit card debt has jumped 25 percent in the past 10 years, reaching $963 billion in January, according to figures from the White House. The average outstanding credit card debt for households that have a card was $10,679 at the end of 2008, according to CreditCard.com, an online market.
House bill: H.R.627
Senate bill: S.235
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