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Taking charge: Law to alter rules for credit card companies

There's no question about it: Americans are leaning heavily on their credit cards.

In recent years, more and more consumers have turned to these seemingly innocuous pieces of plastic to pay for just about anything - whether they have the money to back up their purchases or not.

And as usage has increased, credit card companies have jacked up their fees and interest rates.

But legislation approved by Congress on Wednesday aims to put a stop to these practices.

The bill will revolutionize the market by restricting when and how a card company can raise an individual's interest rate, who can receive a card and how much time people are given to pay their bill.

The measure has been sent to President Barack Obama, who plans to sign it Friday.

In general, the new rules - which go into effect in nine months - will protect debt- ridden consumers from many of the surprise charges common in the industry, such as over-the- limit fees and costs for paying a bill by phone.

Rep. David Dreier, R-San Dimas, supported H.R. 627, the Credit Cardholders' Bill of Rights Act, which passed the House by a vote of 361-64.

"Abusive credit-card policies make it more difficult for consumers to pay off their debt," Dreier said Wednesday in a statement. "This bill, which mirrors the Federal Reserve Board's recent credit-card regulatory action, provides relief for hard-working Americans who are struggling in the current economic downturn."

Cara Eichorn, 46, of Burbank, is one of the lucky ones who has managed to keep a fairly tight rein on her credit-card use - despite the fact that's she's been out of work for much of the past two years.

Eichorn managed a call center for Countrywide Financial Corp., but she left that job two years ago.

Since then, work has been difficult to find, although she had another job for three months last year.

"I would say that my use of credit cards has increased ... it's still at a manageable and tolerable level," she said Wednesday. "But my debt has increased."

Eichorn volunteers her time at Women at Work, a nonprofit job-and-career-resource center in Pasadena.

Last year, the Nilson Report estimated that more than 700 million credit cards were in circulation in the United States. That's more than two cards for every man, woman and child.

In addition, many cardholders are carrying hefty balances. According to the Federal Reserve, the nation is some

$2.5 trillion in debt, excluding home mortgages.

Banks, which oppose the legislation, will need to make up the cost somewhere, and cardholders who pay off their balance in full each month could see new annual fees and lucrative rewards programs canceled. Credit could become harder to come by, too.

And the credit-card companies?

"Every company is in it for making a profit," Eichorn said. "And part of this whole financial problem that took place was because of greed."

The Associated Press contributed to this report.

 

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