Economic Outlook: Consumer advocacy

NEW YORK, May 20 (UPI) -- The first major act of financial reform for the year, a bill to rein in credit card company abuses, passed handily in the U.S. Senate.

The bill, which passed with a 90-5 vote Tuesday, is headed for the House for a vote next week and then to President Barack Obama's desk where it could be signed into law within a week's time. It mandates credit card bills clearly state the number of months it would take for minimum payments to result in a zero balance and how much interest consumers are paying. Moreover, credit card companies will be required to send bills 21 days before a payment's due date and provide 45 days notice before raising interest rates. Payments will need to be applied to the debt with the highest interest rate first and issuers will have to ask consumers' permission before allowing consumers to exceed their credit limits.

Sounds simple, but where there's a take-away, profit-oriented companies will make adjustments where they can.

"Whatever is left in the model to work from, they (credit card companies) will start to maneuver," industry consultant Robert Hammer told The New York Times.

Analysts expect credit card companies, already up against rising delinquency rates, will take it out on the credit card customers who pay their bills on time, returning to the practice of charging annual fees and cutting back on rewards programs.

But analysts also expect no such thing. "If you strip away the reward component of a credit card, it's essentially a commodity," said Rick Ferguson, editorial director at LoyaltyOne, a marketing firm.

The translation: Rewards systems give credit card brands their individual identity. Banks also reap fees from retailers when the card is used, meaning steady use by customers who spend a lot and pay bills on time is still something banks want.

Further behind the scenes in Washington, officials are discussing the formation of regulatory agency that would oversee consumer interests in mortgages, credit cards and mutual funds, The Washington Post reported Wednesday.

Key policy makers, including Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers were scheduled to discuss the proposal at a Treasury Department dinner Tuesday night.

Sen. Richard Durbin, D-Ill., introduced a bill in March to create a consumer-first regulatory commission, the bill co-sponsored by Sens. Charles Schumer, D-N.Y., and Edward Kennedy, D-Mass., the Post reported.

In graphic terms, Elizabeth Warren, who leads the Congressional Oversight Panel, said it was "impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house." However, she said, "it is possible to refinance an existing home that has the same 1-in-5 chance of putting the family out on the street."

In global markets Wednesday, Asian stocks turned flat, following a similar pattern on Wall Street Tuesday.

The Nikkei average in Japan gained 0.59 percent. The Hang Seng index in Hong Kong dropped 0.39 percent. The Singapore Straits Times rose 0.39 percent, while the S&P/ASX index in Australia rose 0.19 percent.

European markets were also flat. In midday trading, the FTSE 100 in Britain fell 0.5 percent. The CAC 40 in France dropped 0.07 percent. The DAX 30 in Germany rose 0.3 percent, while the broader DJStoxx 600 dropped 0.31 percent.