by Joseph Kenny | 04/6/09

In an aggressive move by Congressional Democrats, new legislation is being put on the table that would place new limits on credit card companies. The bill would target the issuers and their sorted reasons for increasing fees on already burdened consumers. The new approach came as a result of heavy debates about how, exactly, to deal with the alleged abuses.

Lawmakers know that finding a proper balance between consumer protection and credit stimulation is essential, but it is also a very time consuming process that is far from completion. While Congress remained initially optimistic about drafting appropriate legislation before recessing for the Easter holiday, there have been some holdups.

Democrat Chris Dodd, chairman of the Senate's Banking Committee, led a panel that voted to send a proposed bill to the Senate floor that would place a ban on numerous practices justified by credit card issuers for increasing their interest rates and fees on consumers. The legislation is already under fire by credit card advocacy groups who suggest that such limits may cost consumers more money.

Those in the Republican opposition have suggested that the answer may lie in other areas of reform. For example, it may be beneficial to prosecute predatory lenders and require all credit card issuers to provide consumer with disclosure information in their agreements written in easy to understand language. Republicans are also quick to point out that new regulations instituted by the Federal Reserve may accomplish many of the same goals without imposing new rules on the credit card industry.

House subcommittee member Rep. Jeb Hensarling had this to say about the Democratic proposal: "This legislation will take us back to an era when competition was limited, working families who needed help were denied access to credit cards, and everyone paid interest rates one-third higher than today's, regardless of whether they paid their bills on time."

In contrast, Democrats offer specific examples of what credit card issuers have done to exploit vulnerable consumers. Both college students and the elderly were targeted card companies and given lines of credit they could not reasonably afford. Obscure language in agreements has kept even consumers that could afford a card in the dark about possible charges and left them paying higher monthly payments that they expected.