WASHINGTON - Credit card issuers' recent actions prove that lawmakers should move up the effective date of new restrictions on card interest rates and fees, U.S. Representative Barney Frank said on Thursday.

Financial companies have taken advantage of a delayed implementation of credit card reforms by raising customers' rates, Frank said.

This is not the type of protection that should wait, and we should move forward, Frank, chairman of the House Financial Services Committee, said during a hearing on credit card reforms.

He said his committee will take a more serious look at another credit card issue -- interchange fees.

Interchange fees are the fees that retailers such as supermarkets and convenience stores pay to banks every time a customer uses a credit card.

Frank and fellow Democratic Representative Carolyn Maloney have introduced legislation that would push forward the implementation of the new credit card rules to December 1, 2009, from February 22, 2010.

The regulations were approved by Congress and signed into law earlier this year by President Barack Obama.

The new rules will sharply restrict credit card issuers' powers to raise interest rates on existing card balances, charge some types of fees, and slap cardholders with unreasonable penalties.

INTERCHANGE DEBATE

Legislation has also been introduced to give merchants greater access to negotiations with banks to establish interchange fees, but those bills are not close to becoming law.

Merchants contend the fees unfairly cut into their margins and drive up prices for consumers. Banks argue that the 50-year-old electronic payments system is efficient and based on a pricing system that benefits businesses and their customers.

The American Bankers Association told lawmakers that merchants pay a penny or two on each dollar of payment card transactions and that this is a very small price to pay for all of these benefits.

A recent study by the Merchants Payments Coalition -- which represents retailers, supermarkets and convenience stores -- said that rate is up to six times greater than fees in other countries.

Republican Representative Jeb Hensarling said Congress must be careful to not crack down too hard on credit card issuers. He said the bill to increase the speed of credit card reforms and pending legislation to crack down on interchange fees could further restrict lending.

I'm afraid that both bills may have potential to simply exacerbate a credit crunch, he said.

(Reporting by Karey Wutkowski, editing by Gerald E. McCormick and John Wallace)

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