Dems Reaping What They Sowed on Rising Credit Card Rates
Congressional Democrats this week have been publicly incredulous that the credit card industry would have the temerity to raise rates and limit lending in the months before legislation restricting those practices takes hold. Indeed, Sen. Charles Schumer (D-N.Y.), who in April asked the Federal Reserve to step in to prevent card issuers from raising rates on existing balances before the law takes effect, renewed that request yesterday:
This is what many of us feared about a law that didn’t take effect right away. It was never going to take this long for the credit card companies to get ready for the new reforms. Instead, issuers are using the delay in the effective date to wring more dollars out of their customers. It is against the spirit of the law and it is just plain wrong.
Omitted in the criticisms, however, is the inconvenient fact that it was the Democrats themselves who bowed to banking industry demands to delay their reforms for nearly a year after the bill was signed into law.
Indeed, the original Senate bill would have implemented the changes immediately, but the timeline was stretched to nine months by Democratic leaders, including Banking Committee Chairman Christopher Dodd (D-Conn.), during the markup of the bill.
A similar scene unfolded in the House, where the initial proposal, sponsored by Rep. Carolyn Maloney (D-N.Y.), called for the reforms to kick in 90 days after the bill’s passage. During a subcommittee markup of the bill, however, Rep. Luis Gutierrez (D-Ill.) extended the implementation timeline to 12 months.
The final bicameral compromise adopted the Senate’s nine-month window, meaning the changes — including that which Schumer has requested of the Fed — don’t take effect until February.
The irony here is that, as a chief justification for adopting credit card reforms as legislation, Democrats had cited the need to expedite similar reforms adopted by the Federal Reserve, but which won’t go into effect until July 2010. The Democrats’ legislation beats the Fed’s rules by a few months — but as supporters of that bill are finding out the hard way, that’s leaving plenty of time for the card companies to cash in on the legal leniencies currently in place.