Last month, the Senate Banking Committee narrowly approved legislation that would curb some fee and interest hikes by credit card companies, while simplifying gift card use. The Bill, referred to by multiple names including the Credit Card Accountability Bill, Responsibility and Disclosure Act, or CARD Act,  reached this latest hurdle one day prior to April Fools day as the Senate Banking Committee voted 12–11 to push it onward.

In late 2008, the Federal Reserve voted on new rules designed to protect consumers from unfair credit-card practices such as two-cycle billing and raising interest rates for unrelated charges. Unfortunately, these changes don’t go into effect until July 2010, and many consumer advocates don’t feel that these rules go far enough.

The currently proposed bill introduces legislation that would curb some fee and interest hikes by credit card companies, along with simplification of gift card use and restrictions regarding individuals under 21.  Some of the highlights of the Bill are  summarized as follows:

• No marketing of credit cards to individuals under the age of 18.
• Restrictions on issuance of credit cards to those under 21- specifically, a requirement that youths pass a financial literacy test or obtain a co-signer.
• Credit card issuers are banned from making unilateral changes to the contract.
• Elimination of fees charged for making payments via telephone.
• Elimination of fees charged for inactivity on gift cards.
• Restrictions on raising interest rates/fees as a result of  changes to a consumer’s credit score or other credit card accounts they hold.

It is important to note, though, that some of these measures are rather tough, and it is unlikely that the bill would pass with all of them included.  And not surprisingly, the bill has not been received well by bankers, who feel this micromanagement will further restrict the infusion of credit into the economy. President Obama stressed in his most recent address to the nation that changes needed to be enacted to prevent credit card companies from charging unfair fees. While this legislation certainly proposes a number of positive changes for the consumer, it is too soon to place any bets on how far it may progress in the Congressional process. Similar legislation is making its way concurrently through the House and these separate House and Senate measures must be reconciled before they can proceed further.

Readers, any thoughts on the legislation, positive or negative?

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