Passed and by a wide margin:
The Senate voted overwhelmingly on Tuesday to put new restrictions on the credit card industry, passing a bill whose backers say will make card-issuers spell out their terms in fewer words, using plain English, and treat customers more fairly.
The 90-to-5 vote, following a 357-to-70 vote in the House on April 30, made it likely that President Obama will have a measure on his desk before the Memorial Day recess. The differences between the House and Senate versions will have to be worked out, but given the political atmosphere it seems likely that the House-Senate negotiations will move quickly.***
The industry has asserted that the legislation may backfire, forcing banks to issue fewer credit cards at greater cost to the current cardholders and making credit harder to get at a time when many Americans need it.
This morning there was some pre-emptive fearmongering by the credit card companies exemplified by this piece in the NY Times:
Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.
Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.
Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.
This is nonsense on stilts, although Hot Air lapped it up, stating that “responsible” people will now be subsidizing “deadbeats.” Actually, what will be happening is the people whom Allahpundit calls deadbeats will no longer be paying for perks and other free stuff for “responsible” people. In fact, he even has the names backwards- credit card companies have long called the “responsible” people “deadbeats”:
People who routinely pay off their credit card balances have been enjoying the equivalent of a free ride, he said, because many have not had to pay an annual fee even as they collect points for air travel and other perks.
“Despite all the terrible things that have been said, you’re making out like a bandit,” he said. “That’s a third of credit card customers, 50 million people who have gotten a great deal.”
Robert Hammer, an industry consultant, said the legislation might have the broad effect of encouraging card issuers to become ever more reliant on fees from marginal customers as well as creditworthy cardholders — “deadbeats” in industry parlance, because they generate scant fee revenue.
In fact, unless things have changed radically since I last worked in small business, the only way credit card companies make any money off of those who pay their bills on time every month is by charging businesses a fee every time they accept payment via credit card. When I ran a clothing store years ago, I preferred people paying in cash or with check (even with the fears of bad checks) because the credit card companies wouldn’t get a cut. In fact, that is why they keep giving a way air travel points and other perks- so you use your card more often, and they can keep getting a cut from other businesses every time you use it. It used to infuriate me, because on top of losing a percentage of every sale, you also had to pay exorbitant leasing fees on the machines, pay for a second phone line for the card, etc. But you had to have a machine, or you would lose more sales. Again, these things may have changed, but back in the early 90’s this is how it worked.
In other words, unless I’m completely off base, “responsible” people won’t be subsidizing deadbeats, but responsible people will no longer be getting a lot of free shit paid for by businesses and other credit card holders in worse economic shape. People with bad credit or in bad financial situations and small businesses were subsidizing perks for other people, not the other way around.
Additionally, what will happen when a credit card company starts to try to charge all these “responsible” credit cardholders? Well, more than likely they will cancel their card and find a credit card company that won’t charge them. Anyone doubt that this is exactly what will happen? Why do free marketers fear the free market? And why do they need airline miles paid for by other people? I thought they opposed transfer payments?