In recent years, the United States has grown to depend on credit card debt in living their everyday life — a move often not in the future financial prospects of the consumer. In the last 10 years alone, credit card debt has increased by about 25%. As a part of the current impetus toward fixing the economy and different business practices in the financial sector, the US Congress has sent a bill to President Obama for his signature designed to protect credit card customers. The bill includes many far reaching measures designed to rein in issues such as some sudden interest rate increases and double late fees practices.

The Congressional measure restricts credit card companies from implementing common practices they use such as retroactive interest rate hike and double cycle billing. Even despite the recent falls in interest rates in the financial sector, consumers can still be impacted and hurt greatly by these retroactive rate hikes. This bill also restricts credit card companies from issuing credit accounts to customers under the age of 18 in an effort to protect underage consumers.

If the bill is signed by President Obama and put into effect as expected, all the bill’s provisions will go into effect after nine months (so thus around February 2010). Some parts of the bill, including those requiring credit card companies to give consumers a 45 day notice before increasing interest rates on a credit card account, will go into effect within 90 days. Both the House of Representatives and the US Senate worked hard in spearheading this bipartisan effort, where similar measures to reform the credit sector in the past have failed to gain momentum. This can be attributed to the recent economic climate and concerns.

Many have hailed the bill as a step in the right direction to help and protect consumers, but other point out that there are weaknesses in the bill. One weakness is that most of the provisions in the bill do not go into effect immediately and will take nine months. This gives credit card companies a lot of time to maneuver and change interest rates and fees before they are blocked from doing so.

Other weaknesses of the bill include failures to cap interest rates and cap fees. Some credit card companies charge as much as 30% interest rate on balances that people keep on their credit cards, where at the same time there is around an 18% current cap on what credit unions and lenders can charge for interest rate on loans. This is a fairly large discrepancy and many have thought shoudl be addressed. Also, there is no specific cap provided for by the bill on late fees, over the limit fees, and other usage fees that consumers may incur.

The bill also does not limit credit card companies on what they can charge on interchange fees which are fees that are charged for credit card processing. The credit card industry, thus, can pass on any negative effects they derive from the provisions of the bill onto their business customers, negatively affecting small businesses who need to collect credit card payments. As small businesses do drive a large portion of our economy, this can have the indirect effect of actually hurting the prospects of an economic recovery.

Despite all the weaknesses, most have hailed this bipartisan bill as a step in the right direction even if it lacks all the bite that many in the financial sector would desire. Let’s hope that credit card companies don’t roll out lots of new fees and practices to go around the provisions of the bill. Before you apply for any credit card, credit line, or loan, you should understand all the rules and regulations and also know what is in your credit report.