Obama signs credit-card reforms into law

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• Obama signs credit-card reforms into law

President Barack Obama on Friday signed into law a measure tightening rules on credit-card rate hikes and practices.

The bill was passed Tuesday in the Senate and last week in the House.

“With this bill, we are putting in place some common-sense reforms designed to protect consumers,” Obama said as he signed the bill at the White House.

“We’re not going to be giving people a free pass and we expect consumers to live within their means and pay what they owe,” the president added. “But we also expect financial institutions to act with the same sense of responsibility that the American people aspire to in their own live.”

Under the bill, credit-card companies will have to take several steps, including posting their credit rules on the Internet and giving cardholders a written statement explaining pending interest-rate hikes 45 days in advance.

Credit-card companies won’t be able to increase interest rates on existing balances except in limited circumstances, such as the expiration of a promotional rate or failure by a customer to make a payment within 30 days of the due date.

The bill includes other restrictions on credit-card practices, including a ban on charging interest on balances that already had been paid and a prohibition on issuing cards to children.

Business groups were not in agreement about the bill.

The National Federation of Independent Business and the National Small Business Association have backed it, but the Small Business & Entrepreneurship Council said the bill will, in effect, impose price controls on the credit-card industry, which would lead to tighter credit at a time when the economy is struggling.

Executives with major banks that issue credit cards have said they may cut back on credit availability because the new law restricts their ability to adjust rates to adequately compensate for their risk.

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