Cardholders' Bill of Rights Passes in House

The U.S. House of Representatives voted 357-70 today to pass the Credit Cardholders' Bill of Rights.

The bill provides consumers with protections from surprise interest rate increases on existing credit card balances and what the Federal Reserve has called unfair or deceptive billing, fee and payment practices.

Many of the provisions mirror sweeping new rules approved by federal regulators in December 2008 and scheduled to take effect by July 1, 2010. However, lawmakers point out that the Fed rules can be more easily repealed than a federal law.

It was deja vu for the House, which passed a version of the consumer credit card bill in September 2008 by a 312-112 vote, only to see it fail when the Senate passed no similar bill before adjournment.

This time, however, the bill has strong backing from the White House. Today's vote was even more lopsided, with 105 Republicans joining 252 Democrats in voting for the reforms.

Treasury Secretary Timothy Geithner met with the bill's sponsor and consumer and civil rights groups April 29 to outline the Obama administration's wish list of credit card protections. They include banning retroactive interest rate increases (See "How to react to a rate jack attack"), allowing consumers to opt in to over-limit fees and requiring issuers to disclose on monthly statements how long it would take to pay off balances if card users pay only the minimum amount due.

"No more fine print, no more confusing terms and conditions," according to Geithner's statement. "We're going to require clarity and transparency from now on."

The week before, Obama met privately with credit card executives to tell them he sided with consumers. "The days of anytime, any reason rate hikes and late fee traps have to end," he said afterward.

The latest House passage comes amid an intense climate of public pressure to give consumers relief from banks that have received billions in taxpayer bailout funds.

The Credit Cardholders' Bill of Rights "stops many of the tricks and traps of changing the terms and changing the due dates that trap so many consumers. It will help many, many consumers," New York Congresswoman Carolyn Maloney said before the vote. Maloney sponsored the bill -- HR 627 -- and has worked more than three years for its passage. Maloney predicted Obama, who campaigned about the need for credit card reform during his presidential bid, could sign legislation into law by the end of May.

Credit card issuers and Republicans who lobbied against the bill warned that limiting interest rate increases (called re-pricing) would lead to higher interest rates for all card users and contract credit at a time when the faltering U.S. economy can least afford it.

The credit card reform debate is far from over. Here's what's next:

• Attention now shifts to the U.S. Senate, where Senate Bill 414 has yet to go before the Senate for a full vote. Senate bill, the Credit Accountability, Responsibility and Disclosure (CARD) Act, has stronger consumer protections and approval is less certain. The bill squeaked out of the banking committee by 12-11 vote on March 31.

• Depending on what the Senate passes, it must be merged with the House bill.

• The final bill will be sent to President Obama to sign.

• As currently written in the House bill, the majority of reforms won't likely take effect until July 1, 2010 -- when sweeping new federal regulations also kick in.