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Pending Legislation

By Jonathan Jones

As of November 2009, here's the new rules and regulatory framework being debated in Congress for the consumer loan industry:

CFPA legislation

(Note: Senate version has yet to be introduced)

Consumer Financial Protection Agency [H.R.3126.IH]

Introduced by Rep. Barney Frank (D-Mass), this bill would establish a Consumer Financial Protection Agency with the authority and accountability to supervise, examine, and enforce consumer financial protection laws. Financial transactions falling under the agency's jurisdiction would include mortgages, credit cards, student loans, auto loans, payday loans and more.

The agency would work in these areas to ban deceptive practices, ensure the safety and fairness of new consumer financial products that come on to the market and, generally, to promote transparency, simplicity, fairness, accountability and access.

UPDATE: On Dec. 11, 2009, the House passed the Wall Street Reform and Consumer Protection Act, which would establish the Consumer Financial Protection Agency.

Overdraft legislation

• Overdraft Protection [H.R.3904.IH] and Fairness and Accountability in Receiving (FAIR) Overdraft Coverage Act of 2009 [S.1799]

Introduced by Rep. Carolyn Maloney (D-N.Y.) and Sen. Chris Dodd (D-Conn.), these companion bills would say banks can only charge overdraft coverage fees if consumers "opt in" to overdraft coverage. The bills also cap the number of fees allowed and reduce the size of overdraft fee to be proportional to the amount overdrawn.

UPDATE: The Federal Reserve announced rules on overdraft protection on Nov. 12, 2009, but critics say the rules don't go far enough and legislation is still needed.

Interchange fee legislation

• Credit Card Interchange Fees Act of 2009 [H.R.2382.IH]

Introduced by Sen. Peter Welch (D-Vt.), this bill would require credit card companies to make transactions transparent by disclosing interchange fees and terms and prohibiting them from charging more for rewards card transaction. It also would allow merchants to offer discounts for cash payments and set a minimum for credit card purchases, a well as give the Federal Trade Commission greater oversight powers for interchange fees.

• Credit Card Fair Free [S.1212.IS]

Introduced by Sen. Dick Durbin (D-Ill.), the bill authorizes providers of a single covered electronic payment system (e.g., Visa or Mastercard credit cards) and any merchants to jointly negotiate and agree upon the fees and terms for access to such a system.

Interest rate legislation

• Protecting Consumers from Unreasonable Credit Rates [H.R.1608]

Introduced by Rep. Jackie Speier (D-Calif.), the bill amends the Truth in Lending Act to prohibit a creditor from extending credit to a consumer under an open end consumer credit card plans for which the fee and interest rate exceeds 36 percent. The bill also establishes criminal penalties for violations and empowers state Attorneys General to enforce this Act.

• Protecting Consumers from Unreasonable Credit Rates [S.500.IS]

Introduced by Sen. Dick Durbin (D-Ill.), this bill amends the Truth in Lending Act to prohibit a creditor from extending credit to a consumer under an open end credit cards for which the fee and interest rate exceeds 36 percent.

• Truth in Lending Clarification [H.R.4002.IH]

Introduced by Rep. Jeb Hensarling (R-Texas), this bill clarifies that the Truth in Lending Act does not prevent financial institutions from immediately enacting interest rate reductions, without any mandated delays.

• Credit Card Fee Limitation and Accountability Act [H.R. 3977]

Introduced by Rep. Betty Sutton [D-Ohio], this bill would prohibit credit card companies from imposing fees for inactive cards or for failing to carry a minimum balance.

• Credit Card Rate Freeze Act of 2009 [H.R.3959 and S.1927]

Introduced by Rep. Betsy Markey [D-Colo.] and Sen. Chris Dodd [D-Conn.], these companion bills would establish a moratorium for on rate increases for 9 months after the CARD Act of 2009 is enacted.

• Interest Rate Reduction [S.582.IS]

Introduced by Sen. Bernard Sanders (I-Vt.), this bill amends the Truth in Lending Act to prohibit the annual percentage rate of interest (APR) applicable to any extension of credit to a consumer from exceeding 15 percent on unpaid balances, inclusive of all finance charges.

View & Read: "Why Not Cap Interest Rates?"

Payday lending legislation

• Payday Lending Reform [H.R.2563]

Introduced by Rep. Heath Shuler (D-N.C.), this bill would require creditors to make specified disclosures when making a payday loan to customers. It would also require payday loan centers to offer extended repayment plans and a 2 day "cooling-off" period for customers.

• C.L.E.A.R. [H.R.1846]

Introduced by Rep. Joe Baca (D-Calif.), the Consumer Lending Education and Reform act (C.L.E.A.R.) would amend the Truth and Lending Act to limit interest rates, fees and charges imposed by payday lenders.

• Payday Loan Reform [H.R.1214.IH]

Introduced by Rep. Luis Gutierrez (D-Ill.), this bill would require specified disclosures when making a payday loan to customers.

UPDATE: On Dec. 11, 2009, the House passed the Wall Street Reform and Consumer Protection Act, which would establish the Consumer Financial Protection Agency.

Gift cards

• Fair Gift Card [S.710.IS]

Introduced by Sen. Charles Schumer (D-N.Y.), this bill declares it unlawful, with certain exceptions, for any person to impose a dormancy fee, inactivity charge or fee, or a service fee with respect to a gift certificate, store gift card, or general-use prepaid card. Declares it unlawful, with certain exceptions, for any person to sell or issue a gift certificate, store gift card, or general-use prepaid card that is subject to an expiration date.

Legislation pertaining to the 2009 CARD Act

• Expedited CARD Reform for Consumers [H.R.3639]

In an effort to stem abusive practices banks and financial institutions are squeezing in before the 2009 credit card reform act fully takes effect in 2010, the House of Representatives approved legislation sponsored by Reps. Carolyn Maloney (D-N.Y.) and Barney Frank (D-Mass.) that would push up by several months the date all the new rules are implemented.

Upon adoption, the bill would immediately put into effect most of the reforms slated to be rolled out in 2010 -- including prohibiting banks from making arbitrary rate increases and requiring payments in excess of the minimum to be applied first to the credit card balance with the highest rate of interest.

Jonathan Jones is a journalist with the Investigative Reporting Program in Berkeley, California. He is currently working on a book about the rubber industry in West Africa.

posted november 24, 2009; updated january 25, 2010

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