by Joseph Kenny | 11/7/09

For a while, there has been Congressional legislation in the works aimed at putting a stop to the abusive practices of credit card companies against consumers.

It’s called the Expedited CARD Reform for Consumers Act of 2009, and in such a tough financial climate, credit card companies are suffering because there aren’t enough customers paying off their balances. Recently, the House Financial Services Committee voted to move up the effective date of these restrictions from February 2010 to December 1. This motion was approved by a voice vote.

The reason Congress has been working so feverishly to pass the reform bill as soon as possible is because the credit card companies are well aware of the legislation and are actively raising interest rates on consumers while they are still able to.

This law would require all major credit card companies to comply by December 1, but smaller companies (those with fewer than 2 million credit cards in circulation) would still be permitted to adhere to the former deadline of next February.

Naturally, there is debate on all sides about the best way to go about reforming credit card practices and the credit industry. The Federal Reserve Chairman Ben Bernanke is insisting that credit card companies need more time to properly adjust to the new, more stringent rules.

He might be right, but no matter how long it takes for the law to be passed, the credit card companies will do what they can to get ahead. In particular, the credit card companies are likely to hike fees as a result of the law, since they will no longer be able to react to changing market conditions by hiking interest rates except in certain limited situations, such as when a cardholder’s payment is late or when a promotional rate expires.

The other big change is the presence of transparency measures, which are designed to help people better understand and follow what the credit card companies are doing. One of these changes is that the credit card company cannot alter a customer’s interest rate without notifying the customer 45 days in advance. Also in talks is a mandate specifying that all bills must be sent to customers at least 21 days before the due date.

There is some dissent to the proposed course of action. A vice president of the banker group known as the American Bankers Association said that it would be “extremely difficult, if not impossible” for the credit card companies to this new December 1st deadline.

He claims that “moving up the implementation date will place additional strain on institutions and is likely to further restrict access to credit at a time when consumers, small business and the broader economy need it the most.”

Whether he is correct remains to be seen, but it is clear that credit laws will be changing drastically in reaction to the prolonged US credit crunch. More than anything else, the law is intended to crack down on unethical practices by the credit card companies, such as deliberately holding payments they have received until past a deadline so that they could charge a late fee.

If the law does nothing else, American consumers will be able to rest a little easier if these types of practices are finally put to rest.