Earlier in 2009, Congress passed and President Obama signed legislation requiring several new credit card rules. These rules were designed to have credit card issuers end what were considered unfair practices, and to protect consumers against further large increases in rates and “hidden” charges. Under the terms of that legislation, most of those new rules were scheduled to take effect between February and August of 2010.
Many in Congress subsequently expressed concern that some credit card companies had raised interest rates and decreased credit limits on many consumers in advance of the effective dates of the changes. In response, H.R. 3639 was developed. This bill moved the effective dates of certain of the new provisions established in the previously-enacted legislation from dates in 2010 up to the date that the bill is signed into law.
Rep. Maloney (D-NY) was the primary sponsor of the bill. She acknowledged that it was “truly unfortunate” that the legislation was required, “but the credit card companies brought it on themselves. Rather than use the months after the date that (the previously-passed legislation) was signed into law to update their systems to get ready for the new reforms, they have used this time to raise interest rates unfairly at any time and for any reason on consumers retroactively on their balances, capturing many of them in never-ending cycles of debt. . . the Pew Foundation issued a report that showed that interest rates have shot up by 20 percent . . . and 90 percent of all credit card debt . . . has had an interest rate increase since the President signed (that) bill into law.”
She added that: “(T)he Pew report also found that 100 percent of bank cards were using practices that the Federal Reserve has called unfair, deceptive, and anticompetitive . . . What we are doing is moving this date up by 5 months, giving relief and protection to consumers and working to help them.”
The Republican minority had opposed the previously-passed legislation, and was opposing H.R. 3639. Rep. Hensarling (R-TX) was among those leading that opposition. He began his remarks in opposition by saying that “although there are some good provisions in the (previously-passed) legislation, ultimately many of us predicted that if it passed, credit would become more expensive and less available to millions of Americans, and that's exactly what we see. Now . . . clearly, there have been misleading and deceptive practices by some credit card companies. We need to have better disclosure, more effective disclosure so people understand the credit relationships in which they enter.”
Hensarling added: “(B)ut we are in the midst of a huge credit contraction that's taking place today . . . Unfortunately, ultimately this (previously-passed) legislation on which (the) effective date is moved up . . . by the bill that is before us will essentially exacerbate that trend.” He argued that “if this bill passes, it's going to be a lot harder for people to access the credit they need to pay their bills . . . And it just couldn't come at a worse time . . . (The previously-passed bill) is only going to exacerbate the matter . . . take away credit cards, make interest rates go up, make credit less available and more expensive . . . .”
Hensarling also said “when you start taking away the ability of companies to price for risk, the people who do it right end up bailing out a number of people who don't . . . if they had a choice of paying a higher interest rate or of having their credit cards taken away from them, my guess is a number of them would choose the higher interest rate. But Congress has taken that decision away from them by enacting the (previously-passed) bill, if we choose to enact this bill, (it) will simply hasten what is already a bad process which is making credit less available and more expensive to thousands of small businesses and to millions of Americans . . . .”
The legislation passed by a vote of 331-92. Two hundred and forty-eight Democrats and eighty-three Republicans voted “aye”. Ninety-one Republicans and one Democrat voted “nay”. As a result, the House approved and sent on to the Senate the bill moving up the effective date for certain new consumer protections for credit card holders.