House approves credit card bill, but it is not the time for elation yet

On Wednesday legislation meant to more strictly regulate the credit card businesses passed the House with majority of 48 to 19 having voted for the bill. Bill of Rights which in practice would codify into law restrictions on deceptive practices issued by the Federal Reserve in December. The new act if passed through the Senate would prevent credit card issuers from saddling cardholders with arbitrary interest rate increases and penalties as well as stop some billing practices.

Nine Republicans, about 1/3 of the party, voted for the bill. Barney Frank, a chairman of the House Financial Services Committee, noted that he was not surprised the measure attracted bipartisan support. "The mood in the country has changed," he said.

Meantime, Frank also said that Barack Obama wants to make some changes to the bill but he provided no details what exactly should be amended. White House spokesman Robert Gibbs told reporters that Obama wanted to make sure the legislation codified the Fed's rules into law.

"We are working closely with Congress on legislation that will promote simplicity, require transparency, demand fairness, and ensure accountability -- so that we can strengthen consumer protections against abusive and deceptive practices," White House spokeswoman Jen Psaki said.

But banks seem to be not very happy about the legislation as they think it would cause damages to fee income at a time when they are fighting one of the worst recessions. In addition the American Bankers Association trade group who represents the biggest credit card issuers, also expressed its concern saying that the House bill could reduce the availability of consumer credit and make it more expensive.

The credit card issuing institutions will be given enough time to get compliant with the Fed’s rules and implement the changes. The bill gives companies at least one year or until July 2010. Still there is a provision in the legislation that in a shorter outlook they should implement a rule about a 45-day period to notify cardholders of higher rates when they are late making payments.

While the reform was a success with the House representatives it remains unclear if it will pass the Senate where 60 votes are needed for a bill to be adopted.