Obama signs into law credit card reform – USATODAY.com
By Kathy Chu, USA TODAY
In the most sweeping changes to the credit card industry in 40 years, President Obama signed into law Friday an act to restrict practices he says contributed to consumers’ financial problems during the recession.
“With this bill we are putting in place some common sense reforms designed to protect consumers,” Obama said at a signing ceremony at the White House.
“We’re not going to be giving people a free pass and we expect consumers to live within their means and pay what they owe. But we also expect financial institutions to act with the same sense of responsibility that the American people aspire to in their own lives,” he said.
The new law — which includes restrictions on interest rate increases and credit offered to college students — deals a blow to the banking industry, which has lobbied aggressively against tighter regulation. At the same time, it provides less than a complete win for consumers because it doesn’t cap interest rates or fees.
The legislation “is not going to be a hanging for banks, but I think Congress has collared them and are bringing them in,” says Robert McKinley, founder of CardTrak.com, which consults with banks. “It’s been the Wild West for the card industry for a long time.”
- Interest rate increases. Issuers can generally raise rates on existing credit card debt only if consumers have paid their bill more than 60 days late.
- Penalty fees. Issuers can’t charge an over-limit fee unless consumers have asked for this additional credit. Banks also can’t impose late fees if they delayed crediting a payment.
- Marketing to college students. Banks can’t extend credit cards to people under 21 without verifying their ability to pay or getting their parents’ permission.
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