Credit-Card Fees Curbed

The Wall Street Journal - Sweeping new restrictions on credit-card companies would ban extra fees and fluctuating rates and arm tens of millions of consumers with more information on their debts.

Starting in February 2010, a Senate bill passed Tuesday would ban practices such as charging consumers to pay by phone and sudden surges in interest rates. Payments above the minimum due would be applied to balances with the highest interest rates. Information once relegated to tiny print must be made clearer, and consumers will soon be told how long it would take to pay off a balance if they pay only the minimum due.

The credit-card overhaul is set to become the first major legislative change to financial regulation outside housing since the emergency bank bailout enacted last fall, and it's not the last expected this year. Tuesday's 90-5 vote followed pressure from the White House on card issuers to improve fairness and transparency for the three-fourths of U.S. households that use credit cards. The measure is likely to pass the House in the coming days, and President Barack Obama is expected to sign it into law next week.

For consumers, the legislation aims to change habits -- perhaps leading them to make fewer big-ticket purchases with credit cards -- by clarifying the cost of using card debt. Several provisions in the legislation are geared toward forcing consumers to recognize how much they're paying in interest. Card issuers would also have to provide information on consumer-counseling and debt-management services.

Consumers also wouldn't face a retroactive interest-rate increase on existing balances unless payments are 60 days overdue. Even after that rate increase, a consumer could get the old rate reinstated by paying on time for six months.

The legislation bans a practice known as double-cycle billing, in which a late-paying consumer is assessed interest on a prior month's balance that had been paid in full, in addition to the late balance. Issuers also will have to send bills 21 days before the due date and provide at least 45 days' notice before changing any significant terms on a card.http://online.wsj.com/article/SB124272801896734045.html#mod=testMod