Credit Card Bill Passes Senate, Good or Bad?

Yesterday, the Senate overwhelmingly passed a credit card bill of rights. It puts into law a lot of the regulations that the Federal Reserve passed late last year. In partciular it will have the following benefits for consumers:

1. The bill requires card companies to lower interest rates for cardholders who have exhibited good behavior and paid on time for six consecutive months. How this will happen and how much banks have to lower rates though is not in the bill.

2. Credit card companies must give 45 days' notice before raising the interest rate.

3. Banks must send your bill out no later than 21 days before the due date.

4. 5 p.m. on the due date is now on time! They can't give you a late fee because the bill arrived at the wrong hour on the due date.

5. No more late fees if due date is a Sunday or a holiday and your payment doesn't arrive until a day later.

6. The banks must now apply extra payments to the highest rate on your account if you have multiple rates, not on the lowest as they often do.

7. Banks must now ask you if you want to go over your credit limit and incur a penalty fee for doing it.

This bill is very similiar to a set of credit card regulations passed by the Fed earlier this year that was intended to protect consumers. Many believed in the provisions so strongly though, that they felt the regulations needed to be made into law. Once the House and Senate agree on a final version, it will be sent to President Obama, who says he will sign it.

So is this good? Many say that it is another way in which the government is mucking with the free market. But is that really the case? Some credit card companies have been profiting through trickery and gimmicks. As we've seen, many consumers with good credit, who were assured one rate suddenly saw the rate change for no apparant reason. That's not right. Will this reduce credit availability? Maybe. And maybe that's not a bad thing. Clearly, many peope were given more credit than they needed or could afford. Not providing the credit is better than giving too much and then bankrupting those individuals with interest rates boosts, late penalities, and other issues.

The bill if anything is just another example of how the easy, anything goes lending environment of the last ten years has come to an end.