House votes to speed up credit card reform

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NEW YORK (CNNMoney.com) -- The House passed a bill Wednesday to move up credit card reforms scheduled to take effect in February.

In May, President Obama signed into law a credit card reform act to crack down on the way issuers raise fees and interest rates. The reforms are scheduled to roll out in three parts over 12 months.

"Just in time for the holidays, Congress can lock in a ban on interest rate hikes on existing balances, and the tricks that have kept far too many consumers trapped in a never-ending cycle of debt," said bill co-sponsor Rep. Carolyn Maloney, D-N.Y., in a statement issued late last month.

House Financial Services Committee Chairman Barney Frank, D-Mass., was the other sponsor of the bill.

The House passed the bill 331-92. Under the bill, the credit card rules would take effect immediately. (See correction.)

Maloney said credit card companies "brought this on themselves" by taking advantage of the time between when the reform act was signed and when it would go into effect by pushing through even more rate and fee hikes.

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"This marks a step forward in bringing consumers badly-needed relief," Maloney said in the statement.

The Senate will also have to vote to pass the measure expediting the changes in order for it to go to President Obama for his signature into law.

A spokeswoman for Senate Majority Leader Harry Reid, D-Nev., said the Senate may soon vote on its own version of the bill, proposed by Banking Committee Chairman Chris Dodd, D-Conn. Specific details were unclear, as the Senate faces a busy schedule in the coming weeks, the spokeswoman said.

The current schedule. The first portion of the reform act went into effect in August, requiring banks to give 45 days notice on major changes to a contract, including rate hikes. Issuers must also give consumers 21 days notice before a bill comes due.

Also, customers now have the right to reject changes to their contracts -- if they do so, they can pay off their balances at their existing rates within five years.

The second part of the reform is currently slated to kick in next Feb. 22. Major changes include prohibiting arbitrary rate increases on existing balances, and requiring that customers opt into the ability to overdraw their accounts.

The third portion is scheduled for Aug. 22, 2010. It calls for "reasonable and proportional" penalty fees, and would require that issuers review all interest rates and reduce them where warranted.

Correction: An earlier version of this article misstated the effective date of the House bill.