Federal Reserve Chairman Ben Bernanke has told Congress that accelerating the effective date of credit card reform legislation would be good for consumers -- but that credit-card issuers need more time to adjust to the new rules.
Democrats on the House Financial Services Committee are pushing a bill to move up the effective date almost three months, to December 1. The law protects consumers from some of the worst credit card abuses, including sudden interest rate increases. While some of the provisions went into effect in August, others aren't scheduled to go live until February and August of next year.
"This bill is needed because too many credit card companies have been using the period since the bill's signing -- the period they pressed for, to prepare for the changes in their business -- in a way that betrays the confidence of their customers," Democratic Congresswoman Carolyn Maloney said in September. After President Barack Obama signed the law in May, some banks responded by raising interest rates and fees.
Bernanke, though, argued in a Tuesday letter to Rep. Spencer Bachus, the senior Republican on the committee, that while moving the effective date up to December "could benefit consumers by providing important protections earlier than scheduled (including protections against applying increased rates to existing credit card balances)," it could lead to problems for credit-card issuers. "Issuers must be afforded sufficient time for implementation to allow for an orderly transition and to avoid unintended consequences, compliance difficulties and potential liabilities."
Bernanke wrote that it would also force the Fed to implement the law "without providing the public with advance notice and the opportunity to comment," as the Fed wouldn't have time to solicit comments.
His protestations didn't impress reform advocates. "For 14 years these are the arguments that have been used to allow abuses of consumers to continue. I'm sorry, but how much more abuse can consumers take?" asked Center for Responsible Lending spokeswoman Kathleen Day. "We have to cut the banks' addiction to bad practices. It's too bad, but they should have thought about this beforehand."
"This is just another example of the Fed putting the interests of consumers behind those of the banks," Day said.
Read the letter HERE: