Finally, Some White House Interest in Credit Card Abuses

The Obama Administration today turned its attention toward abusive credit card practices. After years of presidencies that were at best indifferent or at worst supportive of the credit card industry abuses, to finally have the White House give some attention to these issues is an incredibly welcome development. Specifically, the Obama Administration has indicated it will support H.R. 627, the Credit Cardholders' Bill of Rights Act of 2009. Representatives Carolyn Maloney and Barney Frank have played a leadership role in this legislation, as they have for years with consumer credit issues, and they were able to get the bill through the House Financial Services Committee. The full House is almost certain to pass the bill, but it faces an uncertain future in the Senate.

The Credit Cardholders' Bill of Rights would end retroactive interest rate hikes and hikes without notice, put an end to double cycle billing, and limit fees and penalties. It is legislation that needs to be adopted. Not surprisingly, the bill is facing tough opposition from the financial services industry which is trotting out the usual arguments about credit restrictions and price hikes. These canards, although I know some will disagree with me about that characterization, are used every time consumer lenders face legislation that might make them play fairly. I'll let that debate play out in the comments, as it undoubtedly will.

There is one particular industry argument, however, that strikes me as particularly disingenuous. The New York Times reports that the industry is arguing the federal legislation is unnecessary because it largely duplicates recently adopted Federal Reserve rules. It is true that the legislation does have some overlap with the rules, but that is still no reason for the legislation not to go forward. First, the legislation is not identical with the Fed rules, meaning the legislation would fix some problems the Fed rules will not. Second, to point out the overlap is to beg the question of which action is the redundancy. Why aren't the Fed rules now redundant and beside the point? Third, the Fed rules won't take effect until July 1, 2010, and the legislation would take effect three months after adoption (generally speaking). Fourth and perhaps most importantly, I suspect the real reason the financial industry wants to keep the lawmaking at the Federal Reserve level is that the industry has more influence there. Once these new rules become enshrined in legislation, it will be much more difficult for the financial industry to undo them, which is as it should be.

Comments

[Bill Zielinski]

Nice article summarizing the credit card industry abuses. It is almost impossible to figure out the rules on a credit card and you need a microscope to read the fine print on the inserts which explain policies on interest rates, fees, etc.
Now that the house of cards is falling apart, the credit card industry is charging sky high rates across the board, even to those with the best credit, in order to recoup their losses.

It's definitely time for the credit card industry to reform some of their practices.

[GE Money]

It is really amazing how the finance industry had a great influence on the Fed Reserve level. But as you have said, Obama is not blind to not take notice on the abuses almost all credit card companies impose on their consumers.

The credit card bill of 2009 is certainly good news. It is about time that the government take notice and action to correct this malpractices especially that we are all facing a very challenging time.

Though I must say, that some credit card companies will less likely to be pleased with the legislation of the bill. And it made me worry on their counter measure to the said bill.