Go ahead and skip a credit card payment. Or two.
Senate Republicans and Democrats have written a bill that will prohibit the credit card companies from raising your interest rate unless you are delinquent for 60 days or more in making a minimum payment.
The language is part of a compromise bill aimed at reforming the credit card industry announced today by Senate Banking Committee Chairman Chris Dodd, D-Conn., and the panel’s top Republican, Richard Shelby, R-Ala.
The late payment provision is even tougher on the credit card companies than a bill passed earlier this month in the House, which would permit interest rate increase after a payment is 30 days late.
And the Senate bill would take effect in nine months, unlike the House bill, which would be dormant for a year after becoming law.
Credit card reform had been an uphill battle in the Senate, but that has changed in recent weeks thanks in part to public clamoring for Congress to end what many believe are unfair tactics used by the card companies, such as “universal default” which allows companies to raise a customer’s interest rate based on overall credit risk and not their payment history with that company, and the act of charging interest on more than one billing cycle.
The Dodd-Shelby bill would prohibit companies from issuing credit cards to people under the age of 21, unless they have a co-signer or can provide proof they can pay, and it would ban card companies from raising interest rates in the first year an account is opened, in addition to requiring more disclosures.
Senate Democrats said Monday they are aiming to protect consumers from “deceitful” credit card companies and note that U.S. credit card debt has risen from $221 billion to $876 billion between 1989 and 2006.
President Obama on Saturday called on Congress to pass credit card reform legislation.
Many Republicans remain opposed to the bill, saying it will further weaken the credit markets and cause interest rates to increase for those who pay their bills on time.
“While I expect some battles in the coming days from credit card companies and their allies in an effort to diminish these strict new rules, I stand ready to fight against any attempt to weaken the strong consumer protections in this bill,” Dodd said Monday.
