WASHINGTON - Lawmakers are unlikely to pass card reform this year, but a vote in the House this week may send regulators an important message: Do not back off a proposed crackdown.
Today the House Financial Services Committee is scheduled to begin voting on legislation that marries the toughest elements of Rep. Carolyn Maloney's original bill with some stricter provisions proposed by the Federal Reserve Board and other regulators.
That proposal remains out for comment until Aug. 4, and more than 30,000 letters have already been filed. Observers suspect Rep. Maloney and Financial Services Committee Chairman Barney Frank want to use today's session to send a signal to regulators.
"It keeps their feet to the fire," said Oliver Ireland, a partner with Morrison & Foerster LLP. "It sends a message to the agencies ... that there is still congressional interest in this issue, that they are looking over their shoulder."
The most significant change in the new bill is that it would emulate a Fed provision making it virtually impossible to raise rates on outstanding balances unless a customer paid late or a promotional rate expired. Like her original bill, the new one would limit the use of fees and prohibit payments from being applied to the lower interest rate first, but the new one takes the Fed's definition in banning double-cycle billing.
Banking industry representatives oppose much of the Fed's proposal - issued jointly with the Office of Thrift Supervision and the National Credit Union Administration in May - which would ban several common pricing systems as unfair or deceptive acts or practices. But they oppose the idea of reforming cards through legislation more.
"Congress will benefit from the deliberative nature of the Fed's review of this ... and they should let the process play out," said Ken Clayton, the American Bankers Association's head of card policy.
"The committee has sent a strong message to the Fed already, and the Fed has indicated that they are listening. ... Having a vote could send the wrong message. It may suggest that the Fed should lock itself in on something - try to dictate the wrong solution," Mr. Clayton said. "It politicizes a process in a manner that they may not get to that right balance."
After considering the comments, regulators are expected to write a final rule this year. But Mr. Ireland, a former Fed lawyer, said the central bank will take careful note of the debate and the committee's vote.
"Votes by a committee are a lot more significant than comment letters," he said.
Industry representatives are trying to be strategic as they battle reform efforts on two fronts. They are wary of encouraging members to offer amendments mitigating specific aspects of the bill, especially if they think such amendments will fail, sources said.
Staff members for lawmakers of both parties said they had not received a lot of specific requests for changes by banking lobbyists.
Some Republicans who oppose the bill and would prefer at least postponing the vote had considered offering dozens of amendments to try and push final committee action off until after the August recess, but others cautioned that such a plan could backfire.
"It could prejudice the Fed's regulations with whatever we produce," said a Republican aide. "You could have a situation where we offer a bunch of amendments, and the Fed takes that to mean that Congress is really committed to these ideas. We have to be very careful about the messages that we send, because this isn't going to become law."
In addition, some moderate members from both parties want to avoid a hard vote, especially since regulators are poised to act.
Seven Democrats and seven Republicans wrote Rep. Frank last week to ask that the vote be delayed until the committee could hold a hearing on the regulatory proposal.
Josh Nassar, a lobbyist for the Center for Responsible Lending, said it would like Congress or regulators to go further, but it does not want to hurt the odds for a bipartisan vote by asking for too much.
"We don't want the legislation to be slowed down by dramatic controversial provisions," Mr. Nassar said. "A strong vote sends a very clear message that Congress is reinforcing what the Fed is trying to do, and it gives a boost to their efforts to finish what they started."