Facing pressure from the White House and criticism from constituents, the Senate approved new credit card restrictions on Tuesday scheduled for enactment in February 2010. Among the changes to be enforced if Senate provisions become law:
• Credit card companies will be unable to raise interest rates on existing purchases until balances become sixty days overdue.
• Interest rate increases caused by non-payment can be reversed after six consecutive months of on-time payments.
• Above-minimum payments will be applied to higher interest balances first.
Industry analysts expect the bill to easily pass a House vote, so it can be signed into law by President Obama with enough time for credit card companies to plan procedural changes. Executives from some major credit card companies warned members of the press that the new law could reduce their ability to extend credit to so-called "high risk" customers.
Although CardRatings.com founder Curtis Arnold thinks that regulation is definitely overdue and needed, he is concerned about the response of the industry. "I definitely think average credit card rates will rise by one to two percentage points in the next 6-12 months. We may also see annual fees on some accounts resurfacing that have been a thing of the past for many years," said Arnold.
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