New law means more protections but higher rates for all credit cardholders, bankers say

 By Kerry L. Smith      

   Although the days of surprise increases in credit card interest rates are now gone, the Illinois Bankers Association says new consumer protections will ultimately mean higher rates for everyone.
   After its passage by overwhelming margins in both the House and Senate, President Barack Obama signed the Credit Cardholders' Bill of Rights Act of 2009 into law May 22.
   Although U.S. Rep. Carolyn B. Maloney (D-New York) introduced the comprehensive reform legislation in early 2008 as H.R. 5244, it never reached the floor of the Senate last year. This year, however - amidst a rising swell of foreclosures, personal bankruptcies and other financial calamities, the reintroduced package - H.R. 627 - sailed through by a margin of 357-70 in the House on April 30 and 90-5 in the Senate on May 19.
   Illinois Bankers Association president and chief executive officer Linda Koch says that although the new law contains many necessary provisions to protect cardholders, it forces credit card issuers to treat all cardholders the same - whether they're paying on time or not. By blurring the distinction between good payers and spotty ones, she says, it increases card companies' overall risk. To balance that increased risk, the companies will likely raise rates for all.  [continue]