US credit card reform bill
US President Barak Obama signed into law sweeping
reforms that restrict credit card interest rates and fees, making a victory
for Democrats trying to help recession-weary consumers.
US President Barak Obama said
at a signing ceremony at the White House, With this bill we are putting in
place some common sense reforms designed to protect consumers. Were
not going to be giving people a free pass and we expect consumers to live within
their means and pay what they owe. But we also expect financial institutions
to act with the same sense of responsibility that the American people aspire
to their own lives.
Analysts said that the enactment marks the crest
of a backlash against the card industry after years of rate and fee hikes and
aggressive marketing programs that have angered consumers. The reforms won wide
backing among lawmakers, who said constituents were tired of hidden charges
from card issuers especially from those US banks that received billions of
dollars in taxpayer bailouts.
The law largely codifies a set of rules issued
by the Federal Reserve last year and puts them into effect in February 2010,
five months sooner than Fed had planned. The law represents the first major
financial regulation reform completed by Obama as he tackles a rewrite of the
rules of banking and the markets to better protect consumers and investors,
and prevent another credit crisis.
Senate Banking Committee Chairman Christopher
Dodd who shepherded the bill through Senate said Today is the day we finally
make credit card companies accountable to their consumers and responsible for
their actions.Cardholders will now get a 45-day notice before their interest
rate is changed. The industry could potentially lose about $15 billion in penalty
fees each year, according to White House estimates. The new will also help consumers
carrying card balances as long as they dont fall behind on payments by more
than 60 days. After 60 days, their rates may increase.
The law is expected to hurt profits of major
card issuers such as Citigroup Inc, Bank of America Corp, JP Morgan Chase &
Co and Capital One Financial Corp. Banks say the bill is a setback for banks
seeking to retain sorely-needed revenues. The changes may cut the flow of credit
to consumers because it will make it more difficult for issuers to set rates
based on the risk their customers pose.
The banks were also hit with a one-time $5.6
billion fee by the Federal Insurance Corp to replenish its dwindling deposit
insurance fund. The FDIC could impose additional fees later if needed. Banks
say the reforms come at a cost. Banks have repeatedly warned higher interest
rates are likely to result because it will be more difficult to set rates based
on the risk that customers pose. The higher rates mean less credit available
for consumers. The industry is already experiencing heavy losses from the 90
million households that carry cards. The losses are expected to worsen as the
year goes on.
The American Bankers Association, which represents
the biggest credit card issuers, said the law will transform the credit card
industry. ABA President Ed Yingling told Reuters, It will be a very different
product, a lot simpler product which is what people want. It does change the
economics. Its now a longer-term loan; its not a short-term loan any more.
The law sharply restricts credit card issuers ability to raise interest rates
on existing balances, to charge certain fees and to slap cardholders with penalties.
Americans owed more than $945 billion in credit
cards debt in March 09. The amount has fallen during the current recession
but credit card indebtedness is still about 25% higher than a decade ago.
Suspicion & discord must end:
Extending a hand of friendship to the Muslim
world, US President Barak Obama called for a new beginning between the United
States and Muslim around the world saying together; they could confront violent
extremism across the globe and advance the timeless search for peace in the
West Asia. This cycle of suspicion and discord must end, Mr Obama said.
In a speech that was littered with references
to the Quran, Mr Obama, who has been trying hard to repair ties with the Muslim
world which has been alienated by US policy, rolled out his plan for engaging
with the Muslim world. The President also used his own Muslim roots to push
across the message that the US was not against Islam or the Muslim world. Mr
Obama started his highly anticipated Cairo speech by going back to history and
tracing tensions that were rooted in history. The relationship between Islam
and the West includes centuries of co-existence and cooperation, but also conflict
and religious wars. After going into history, Mr Obama also touched on the
main sources of current tension including the situation in West Asia, Afghanistan
and nuclear standoff with Iran.
On West Asia,
the US president said that he understood both the Israeli and Palestinian position.
Expressing sympathy for the Palestinian cause, Mr Obama said he supported an
independent Palestinian state that coexisted peacefully with Israel. So let
there be no doubt; the situation for the Palestinian people is intolerable,
America will not turn its backs on the legitimate Palestinian aspirations for
dignity, opportunity, and a state of their own. He urged Hamas to give up violence
and recognise Israels right to exist. At the same time he said it is deeply
wrong to threaten Israel with destruction.
Saying he would not see the conflict from just
one side, he said that Israelis must acknowledge that just as Israels right
to exist cannot be denied, neither can Palestines and that Israel must live
up to its obligation to ensure that Palestinians can develop their society.
The United States does not accept the legitimacy of continued Israeli settlements.
This construction violates previous agreements and undermines efforts to achieve
peace. It is time for these settlements to stop.
he said the US had gone into Afghanistan out of necessity after the 9/11 attacks.
In which the al-Qaeda killed 3,000 people. He further said that the US did not
want to keep troops in Afghanistan. We would gladly bring every single one
of our troops home if we could be confident that there were not violent extremists
in Afghanistan and Pakistan determined to kill as many Americans as they possibly
can. But that is not yet the case, he said.
Finally on Iran,
Mr Obama said that the US has made it clear to the Iranian leadership that it
is prepared to move forward. He said he understood the protest that some countries
have weapons that others do not. No single nation should pick and choose which
nations hold nuclear weapons. That is why I strongly reaffirmed Americas commitment
to seek a world in which no nations hold nuclear weapons. He said that any
country including Iran had the right to access peaceful nuclear power if it
complies with its responsibilities under the nuclear Non-Proliferation Treaty.
For all expectations from the US President Barack
Obamas most anticipated policy speech, at Cairo University, touted as a historic
address to a billion people, no body really seriously anticipated the announcement
of a tangible, immediate shift in policy.
Obamas speech did indicate a possible new impetus
and a departure from status quo. His speech does seem to mark a decisive end
to the confrontation and brazen ways of the US in the recent past.