Credit cards: No holiday help from Congress
Congress sputters in push to stop credit card issuers from raising rates before tougher laws kick in on Feb. 22.
WASHINGTON (CNNMoney.com) -- A congressional effort to enact swift rules to protect credit card consumers during the holiday shopping season is all but dead.
Tough new rules are already slated to go into effect on Feb. 22. The new rules, enacted by President Obama in May, prohibit banks from hiking interest rates on existing balances of fixed-rate cards unless the cardholder is two months late in paying the bill.
After credit card companies started hiking rates over the summer, the House and Senate offered proposals to move up the effective date of the new rules or to freeze rates until the new law kicks in.
But the Senate has introduced a different version and has shown no signs of taking up the House bill.
Last week, Sen. Chris Dodd, D-Conn., tried to fast-track a bill he introduced to freeze rates, but Republicans blocked the move.
"The holiday season is upon us. Hard-pressed Americans want go out and do what what they can to help their families and celebrate, in a very difficult time, some joy ... by taking a credit card out and making those purchases," Dodd said from the Senate floor. "They're watching ... an industry continue to skyrocket these rates and fees on people."
Dodd, who chairs the Banking Committee, has not given up on his rate freeze proposal. "Senator Dodd is going to use every opportunity he can to pass this bill," said Dodd spokeswoman Justine Sessions.
But Congress watchers say they don't expect the Senate to pass the freeze now that the effective date is looming, especially as health care reform and the shaky job market dominate lawmakers' attention.
"It's going to be very hard to do, because you just don't have time to move it through the chambers," said Dan Clifton, head of policy firm Strategas Research Partners. "There's probably no room to do it through December or probably through January."
In the meantime, credit card rates continue to inch higher, according to a Government Accountability Office report released last week.
"In recent months, changes in the economy and the passage of the [new law] have led many issuers to 'reprice' their credit card accounts by altering the rates, fees, and other terms that apply to cardholders' cards," the government watchdog said.
Interest rates on consumer credit cards have been increasing steadily since the second quarter of 2008, when rates were 11.88%. Since then, rates have shot up to 13.32% in the second quarter of 2009, according to Federal Reserve data.
The banking industry, which opposed the bills to move up the tougher rules, says its recent rate increases have more to do with accounting for the increased risk in lending to strapped consumers who can't pay their bills.
"It's unfortunate that the economy is struggling during the holiday season, but credit card interest rates reflect the risk in the economy," said Scott Talbott, chief lobbyist for the Financial Services Roundtable, a business group.
Correction: An earlier version of this article misreported the proposed effective date of the House bill.