WASHINGTON, DC - In an effort to end deceptive credit card practices, protect consumers, and help restore confidence in our economy, the U.S. Senate today passed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act by a vote of 90 to 5. Cosponsored by U.S. Senator Jack Reed (D-RI), this legislation prohibits credit card companies from charging excessive fees, arbitrarily changing interest rates, and burying these terms in complex contracts. The bill also includes a number of initiatives thwarted by industry that Senator Reed has supported throughout his time in the Senate.

"This legislation reins in abusive credit card practices by preventing companies from changing rates, charging new fees, and adopting new policies without notifying consumers. It will make it easier for cardholders to understand the terms of their agreements," said Reed, a member of the Banking Committee.

According to a recent study by the Pew Charitable Trusts, 100 percent of credit cards have policies that the Federal Reserve determined cause substantial harm to consumers. And 93 percent of those contracts allow the credit card company to raise the interest rate at any time, for any reason.

The CARD Act protects consumers by establishing fair and sensible rules for how and when credit card companies can raise interest rates. Card companies will now be required to give a 45-day notice before increasing rates, and will no longer be able do so on most existing balances. The legislation also cracks down on abusive fees. For example, consumers no longer will have to pay a fee just to pay a bill. And credit card companies must mail statements 21 days before a bill is due, so cardholders can avoid hefty late fees. The bill also protects consumers by making credit card statements understandable and protects college students from predatory marketers. And it strengthens oversight of credit card companies to keep the industry in line.

"Americans are still suffering from the fallout caused by financial institutions that were able to pursue profits without reasonable safeguards for borrowers. Robust consumer protections like these not only benefit every American, they also benefit the whole economy," said Reed.

In December of 2008, federal regulators finally approved a rule preventing credit card companies from unfairly using deceptive bait and switch lending practices. However, the changes were not going to take effect until July 1, 2010. Senator Reed subsequently wrote to Federal Reserve Chairman Bernanke urging him to monitor credit card interest rates and consider accelerating the effective date to prevent credit card companies from increasing fees on consumers before the new regulations take effect. The bill passed today contains an accelerated effective date.

"Consumers have been unfairly saddled with higher credit card interest rates that make it harder to make ends meet. Change is urgently needed, and I am pleased that much of this bill will take effect just nine months from enactment. This is an aggressive but achievable goal that will improve transparency and put stronger safeguards in place to protect consumers," concluded Reed.

Reed also supported an amendment which would have capped interest rates on credit cards at 15%. This amendment, however, was defeated.

The CARD Act is supported by several key consumer groups, including the Consumer Federation of America and Consumers Union. Among other provisions, this legislation will:

• Protect consumers from arbitrary interest rate, fee, and finance charge increases and account changes;
• Prohibit issuers from using a consumer's card history with another creditor to raise interest rates on existing balances ("universal default" ban);
• Prohibit interest charges on paid-off balances from previous billing cycle ("double-cycle billing" ban);
• Require payments to be applied first to the credit card balance with the highest interest rate;
• Protect students and other young consumers from aggressive credit card solicitations;
• Ensure that payments are fairly allocated to the account with the highest interest rate first;
• Require greater disclosure of rates, terms, and billing details by credit card companies; and
• Establish tougher penalties for companies that violate the law

The bill must now be voted on by the U.S. House of Representatives, before it can go to the President to be signed into law.