Oct. 26 (Bloomberg) -- Senator Christopher Dodd introduced a bill to freeze interest rates on existing credit-card balances after bankers said they may struggle to comply with a House bill that seeks to move up the start date for a new federal law.

“There have been a lot of arguments, whether you agree with them or not, that credit-card companies can’t possibly implement the Credit CARD Act any faster,” Dodd spokeswoman Kirstin Brost said today in an e-mail. “This bill says fine, put those arguments aside, let’s freeze rates today.”

The House Financial Services Committee last week approved a bill that would move up provisions of the Credit Card Accountability Responsibility and Disclosure Act to Dec. 1 from Feb. 22. Representative Barney Frank, the committee chairman and Massachusetts Democrat, has said an earlier date would prevent banks from “taking advantage of the delay” by raising rates.

Federal Reserve Chairman Ben S. Bernanke and industry leaders including Discover Financial Services Chief Executive Officer David Nelms have said banks face technological and logistical challenges making it difficult to comply with the earlier start date.

The law requires issuers to provide 45 days notice of rate increases and let customers in good standing reject such changes by closing their accounts and paying off balances under the original terms. Provisions set to take effect Feb. 22 include a mandate that banks apply payments to higher-rate balances first, which Nelms said requires extensive programming and testing.

‘Immediately Freeze’ Rates

Dodd’s bill would force banks to “immediately freeze” rates until other provisions take effect by the February date. Brost said Dodd would have preferred the law take effect immediately, rather than implemented in stages.

“Credit-card companies have been jacking up rates in a last-ditch effort to squeeze customers before all of the bill’s provisions can take effect,” Dodd, chairman of the Senate Banking Committee and a Connecticut Democrat who helped to write the law, said in a statement.

The card law already limits interest-rate increases and a freeze would force banks to cut back on lending, said Kenneth J. Clayton, senior vice president and general counsel for card policy at the American Bankers Association.

“In the end, it’s consumers and small business that will suffer,” Clayton said in an e-mailed statement.

Credit-card issuers including JPMorgan Chase & Co. and Riverwoods, Illinois-based Discover raised interest rates and fees after President Barack Obama signed the law on May 22.

Wells Fargo & Co. said a 3-percentage-point interest rate increase will be imposed on a majority of its customers on Nov. 30, a day before the credit-card law would take effect under the House bill.

To contact the reporter on this story: Peter Eichenbaum in New York at peichenbaum@bloomberg.net

Last Updated: October 26, 2009 17:39 EDT