Senate deal on credit card curbs

Draft legislation could push proposal to Senate vote soon but sticking points with House bill remain. Industry vows to fight.

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By Jennifer Liberto, senior writer

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WASHINGTON ( -- Key Senate negotiators have reached a deal on legislation targeting credit card rates and fees, the lead Democratic senator on the issue said Monday.

The development could spur the bill to a Senate vote as soon as this week, but more fights remain in fully reconciling the Senate bill with an earlier version that passed the House.

A congressional crack down on credit card companies has grown increasingly popular. President Obama and top White House advisers got involved in negotiations a few weeks ago. Obama said Saturday he'd like to have the bill on his desk by Memorial Day.

The office of Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, released a summary of legislation Monday.

According to copies of the legislation distributed by lobbyists, the Senate's new bill is tougher than a similar bill passed in the House by 357 to 70 vote last month. The Senate bill still faces possible amendments and could change further.

Among other things, the Senate bill would:

  • Go into effect nine months after passage, which is sooner than the House bill.
  • Ban gift card issuers from charging "dormancy fees" on cards redeemed too late; the House bill doesn't address gift cards.
  • Prevent those under 21 from getting a credit card unless they can prove they have an income stream to pay off debt or have their parent's signature; the House bill places less onerous restrictions on those under 18.
  • Allow credit card issuers to raise fees if a consumer is 60 days late on a payment; the House bill and Federal Reserve rules allow fee hikes after payment is 30 days late.

The House bill, which won 105 Republican votes, cements into law many changes to credit-card practices that the Federal Reserve passed last year. Among them: preventing credit-card issuers from hiking interest rates based on nonpayment of unrelated bills.

However, the Fed changes don't go into effect until July 2010 and could be more easily undone than any consumer protections passed by Congress, proponents of the bill say.

Dodd has been working for weeks on a compromise with the top Republican on the Banking Committee, Sen. Richard Shelby, R-Ala. Dodd has also been working with the House to try to get the bills more aligned with one another.

Credit card industry advocates caution that the Senate bill won't be the final word on the issue, and they plan to fight some of the provisions.

"We have serious concerns with the Senate bill, and we oppose any amendments to the bill," Scott Talbott, a lobbyist for the Financial Services Roundtable, an industry group.

One issue that was pending was how to treat cardholders who roll over debt from older cards to take advantage of low interest rates on new ones. Such consumers sometimes face two different rates on the new card because companies credit payments against the lowest interest rates first.

The Senate bill now reflects the House bill in forcing any payment to be entirely deducted from the balance at the highest interest rates.

New Fed guidelines that take effect next July would ensure that balance repayments are credited proportionally, giving consumers a chance to whittle down debt accrued at the highest interest rates. To top of page

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