Credit Slips Goes to Washington
Today Katie Porter, Adam Levitin and I testified before the Financial Services subcommittee on Financial Institutions of the House Committee on Financial Services, along with Professor Larry Ausubel and four representatives of the credit card companies. Congresswoman Maloney has sponsored a bill with 82 coauthors that would outlaw some of the worst credit card tricks and traps.
There's a lot to talk about, but I want to start our coverage with the four people who didn't get to talk.
Our panel was supposed to be the second panel. The first was four regular people who had credit card stories to tell. They had flown in from around the country with their credit card bills in hand, only to learn that they couldn't talk unless they would sign a waiver that would permit the credit card companies to make public anything they wanted to tell about their financial records, their credit histories, their purchases, and so on. The Republicans and Democrats had worked out a deal "to be fair to the credit card lenders." These people couldn't say anything unless they were willing to let the credit card companies strip them naked in public.
So that's where it stood when Congressman Bachus roared into the hearing about three hours after it had started. It seems that someone in the press had made some critical statement about the deal, and he was furious. He kept talking about how it wasn't fair that someone could say something and there wouldn't be any way for the credit card companies to say whether it was true or not. Fair is fair, he kept insisting.
I had never heard of a deal that kept ordinary citizens from testifying, so I asked a question to make sure I understood. During the preceding 3 1/2 hours the credit card issuers had repeatedly made various factual statements about their practices, their customers, their revenues and so on (e.g., "30% of customers with two late payments will default," "College students have the same default rates as our other customers" or "98% of payments are made for free.") So I asked if the credit card companies were going to testify to such factual statements, would they be required to produce the data to back up the claims so that we could all see it and evaluate it. In our testimony, Katie, Adam, Larry and I all used public data and footnoted our work. Surely it wouldn't be fair for the credit card companies to make factual assertions based on secret data that no one could challenge because no one else had any access to the underlying information. If they want to testify as to "facts" about their customers, shouldn't hey have to back up their claims?
I never quite understood the Congressman's reply. I'm still waiting to find out what fair-is-fair really means.