Smart Borrower Blog

Frank Wants to Push Up Credit Card Limit Start Date

U.S. Representative Barney Frank, D-Mass., intends to ask Congress to move up the effective start date of credit card legislation signed earlier this year by President Obama.

Originally set to take effect in stages with a final date of February 2010, Frank is unimpressed with the changes card issuers are making ahead of the deadline for the Credit Card Accountability Responsibility and Disclosure Act.

In anticipation of the new regulations, several lenders including JPMorgan Chase & Co. have raised interest rates and fees, cut credit limits, and closed inactive accounts.

“We are not happy about what we are hearing on what banks and credit card companies are doing in advance of the effective date,” said Frank aide Steven Adamske. Frank “may be filing a bill soon … We are looking at Dec. 1, 2009.”

The new law will require credit card issuers to give customers three weeks notice instead of two before payment due dates. It will also restrict lenders from raising interest rates on cardholders who miss a payment with another lender. Banks will be prohibited from charging certain other fees and imposing certain penalties on customers.

Not all involved are excited about the possibility of an earlier start date.

“We share concerns raised by the Federal Reserve and industry observers that moving too quickly in this area could dramatically reduce the availability of credit to consumers and small businesses at a time when the economy can least afford it,” Ken Clayton, senior vice president for card policy at the American Bankers Association, said in a statement.

It does seem like a risky thing to do in this economy. If banks have already started reducing credit limits and closing accounts before the enactment of this law, aren’t they even more likely to do so after the deadline when the restrictions can actually hurt their bottom lines?