Obama signs credit card reforms

WASHINGTON, May 22 (UPI) -- U.S. President Barack Obama Friday signed a bill overhauling credit card rules, banning issuers from suddenly raising interest rates and charging hidden fees.

"With this new law, consumers will have the strong and reliable protections they deserve," Obama said in signing the Credit Card Accountability, Responsibility, and Disclosure Act.

The White House said Americans pay some $15 billion annually in penalty fees, in part because of credit card contracts that are unfair and deceptively complicated. Nearly half -- 44 percent -- of the 80 percent of American families with credit cards carry a balance.

"The reason this legislation is so important is because there are many … who relied on credit cards not because they were avoiding responsibilities, but precisely because they wanted to meet their responsibilities -- and got trapped," Obama said.

Obama noted interest rates for millions of cardholders have jumped in the past six months, making paying off balances more difficult.

"With this bill, we're putting in place some common-sense reforms designed to protect consumers … . I want to be clear about this: Credit card companies provide a valuable service; we don't begrudge them turning a profit. We just want to make sure that they do so while upholding basic standards of fairness, transparency, and accountability," Obama said.

Among other things, the act safeguards against:

-- Interest rate hikes, by generally barring card issuers from raising rates, unless consumers are more than 60 days in arrears.

-- Penalty fees, by barring imposition of fees for exceeding a card's limit, under most conditions.

-- Marketing to college students, by barring card issuers from extending credit cards to people under 21 years, without verifying their ability to pay or getting their parents' permission.

The bill also requires a card's terms and conditions be written in plain English as well as posted on the card issuer's Web site.