House votes to accelerate new credit card rules

By Anne Flaherty - The Associated Press

WASHINGTON -- The House voted on Wednesday to impose immediately tough new rules for credit card companies after voters complained of increased interest rates and steep new fees.

The bill, approved 331-92, would accelerate the enactment date of legislation passed this spring that limits when and how banks can charge borrowers.

The proposal's chances in the Senate were dim, where several lawmakers worried that a short deadline would hurt the industry and limit the availability of credit.

Nevertheless, investors seemed to take notice of the House rhetoric. Bank stocks tumbled in the last hour of trading on Wednesday immediately after the House vote, causing a late-day slump in the market.

Democrats said the bill was a warning shot to lenders to stop price gouging.

“This is both real and a lesson to them,” said Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee.

Last spring, Congress passed legislation that would protect debt-ridden consumers from many of the surprise changes that have become common in the industry. President Barack Obama signed that bill into law in May and most of the new rules will take effect on Feb. 22.

Under the new law, lenders won't be able to increase rates on existing balances suddenly unless a person is more than 60 days behind on a payment.

Banks also couldn't give cards to people younger than 21 unless a parent co-signed or the cardholder could prove they had the means to pay back the loan.

To assuage concerns in the Senate that the restrictions were too onerous, Democrats gave banks nine months to prepare for the changes.

But lawmakers say that many credit card companies have used the grace period to increase rates. According to a recent Pew study, even the lowest interest rates offered on most bank cards have jumped by more than 20 percent since last year.