Credit card squeeze

A bill targeting abusive practices in the credit card industry squeaked through the Senate Banking Committee on Tuesday as House lawmakers head into their own markup on Wednesday to clamp down on the industry.

The Senate bill, introduced by Sen. Chris Dodd (D-Conn.), passed by a margin of 12-11 and intends to limit the industry’s ability to hike interest rates on outstanding balances as well as to restrict fees and penalties. The bill was opposed by all of the committee’s Republicans as well as Sen. Tim Johnson (D-S.D.), setting up a tough fight in the full Senate. The bill included several amendments, including one by Democratic Sens. Charles Schumer (N.Y.) and Mark Udall (Colo.) to restrict fees on gift cards and require that they remain valid for five years.

{mosads}The financial-services industry is strongly opposed to the bill, and 10 trade associations, including the American Bankers Association, the National Association of Manufacturers and the U.S. Chamber of Commerce, sent a letter this week calling the bill “flawed in many respects.” The industry says the bill would further restrict the availability of credit.

On Wednesday, the House Financial Services Committee will consider a bill introduced by Rep. Carolyn Maloney (D-N.Y.) that would also restrict the industry.

Maloney’s effort follows a series of changes to credit card policies issued in December by the Federal Reserve. The bill would put those changes into law three months after it is enacted. As it stands currently, the Fed’s rules would take effect in July 2010, which consumer advocates say is too far in the future.

Maloney offered a similar bill in the last session of Congress that passed with broad bipartisan support. The bill passed by a vote of 312-112, with 82 Republicans voting in favor and only one Democrat opposed. Maloney’s bill did not have companion legislation in the Senate in the last session of Congress.