WASHINGTON, (Reuters) – The U.S. Senate yesterday voted 90-5 to approve a bill to curb sudden credit card interest rate increases and hidden fees, with President Barack Obama expected to sign it into law by the end of the month.
Credit card issuers’ shares fell after passage of the bill, the first of several banking and market regulation reforms expected from the Obama administration as it deals with the worst financial crisis in generations and a deep recession.
The credit card “consumer bill of rights,” as supporters describe it, must go to the U.S. House of Representatives for a vote before reaching the president. The House approved it in a very similar form last month by a 357-70 vote.
House Democratic Leader Steny Hoyer told reporters yesterday: “We expect to pass (the bill) by sometime tomorrow, the earlier the better … My expectation is that we will send that bill directly to the president from the House.”
Analysts said the profits of major card issuers such as Citigroup, Bank of America, JPMorgan Chase and Capital One would be hurt by the bill.
The KBW Banks index of 24 leading bank stocks closed down 3.43 percent yesterday following the Senate vote, with broader market indexes modestly lower on the day.
Shares in American Express ended down 5.1 percent to $24.79; CapitalOne, down 4.5 percent to $24.90 and MasterCard, off 3.9 percent at $166.73.
Enactment of the bill into law would mark the crest of a political backlash against card companies after years of interest rate and fee increases and aggressive marketing strategies that have angered consumers, analysts said.
It would also mark an opening-round win for Obama as he undertakes a major overhaul of the rules governing the banking industry and financial markets to better protect consumers and investors, and to prevent another credit crisis like the one now ravaging the world’s largest economy.
Treasury Secretary Timothy Geithner said credit card reform is a key part of the administration’s efforts to fix the economy and the financial system. In a statement, he called the bill “an important step forward in consumer protection.”
But American Bankers Association President Edward Yingling said the bill “will undermine the availability of credit” by restricting lenders’ ability to price for risk.