President Obama Addresses Credit Card Practices With Industry
Apr 25th, 2009 | By Rob | Category: Government
As President Obama’s first 100 days draw to a close, he has finally stepped up to the plate on his campaign promise of government-led credit card reform. Earlier this year, I noted that credit card reforms were noticeably absent from the President’s website, Whitehouse.gov. Now, his plan for “cracking down on credit cards” is a front and center featured section on the website.
On Thursday, the President and advisors met with credit card executives to discuss additional consumer protections for credit cardholders. In the meeting, Obama told credit card industry representatives that he intends to sign a law providing increased consumer protection to consumers holding credit cards.
Following the meeting, the President set forth three core principles for reform in a speech:
1. The days of unfair interest rate hikes and abusive late fees have to end.
2. Credit card companies have to write their forms, statements, and terms and conditions in plain language without the fine print.
3. The contract terms for a credit card have to be easily accessible online so that users can comparison shop.
The President also recognized that the ability of consumers to have choice amongst different credit card options was valuable, but that every credit card company should issue a “default credit card” with the simplest terms possible to make comparisons easy. The idea of having a set of national credit card terms (I have also seen this referred to as a plain vanilla credit card) that is the same between different credit card companies is an extremely interesting one and one of the more innovative proposals for reform that I have heard recently. We’ll no doubt be talking about it more if it gains traction among the Congressional proposals.
My disappointment with Obama’s demand for “clarity and transparency from here on out” is that there hasn’t, as of yet, been any efforts to address the debt which consumers have been trapped in through the practices uniformly considered deceptive - anytime, for any reason interest rate increases and massive late fees acting as little more than a penalty. If the behavior is unfair, then the banks shouldn’t be allowed to profit from their transgressions.
I’ve expressed my understanding before about the need to allow banks to make a reasonable profit on credit cards and the wisdom of challenging banks on credit cards in the middle of the economic crisis. But we don’t let individuals keep money that they swindle from the American public through deceptive practices - why should credit card companies operate under different terms?
I have seen estimates that credit card companies have raised interest rates on the credit cards of as many as 70 million users from March 2007 to February 2008. Recognizing that credit card companies maybe attempting to avoid the effect of coming federal regulations on credit card companies by preemptive rate increases, Senators Chris Dodd and Charles Schumer asked the Federal Reserve to immediately implement regulations set to take in effect in July 2010 that would limit interest rate increases on existing balances.
Still, I’m encouraged by the President’s words and the press coverage of the high profile meeting. Now, let’s hope that the House and Senate can do what they have been unable to do so far - pass meaningful legislation reforming credit card practices.
[...] Update: You can read about the meeting here. [...]
well it seems to be a great idea. But it wont be inforced until 2010. what about now. I paid my bills every month your payment is one day late now you owe two payments. im retired and have a set income. these fees are terriable. I cant afford to pay them. and the credit card companys call you ten times a day. you try to explaine that you only have so much money you dont have extra. well they could care less. thanks for listening
There is no reason for credit card rates of 20-50% when our inflation is in the low single digits and prime is in similar ranges.
There is no reason for allowing them to rape the american public with that kind of usury.
How about protecting our ecomonmy, and American citizens by putting a reasonable cap on card rates that is not more than 10% above prime?
That help stop the credit card defaults, auto loan defaults, and mortgage loan defaults, when the credit card companies force people into default on all loans by pushing rates and payments several times what consumers initially agreed to with rates less than 10% initially … or even into bankruptcy where all lenders suffer because of the credit card abuses … and in the end, all Americans which pickup the tab for those unnecessary defaults.