Credit Card Issuers Face New Scrutiny; White House Meeting on Agenda
Friday, April 17, 2009
Under pressure for questionable industry practices, top executives of 14 of the nation's largest credit card companies are heading to the White House on Thursday for a meeting with senior administration officials.
The executives plan to talk about their efforts to increase transparency and help the economy, according to an industry official and a Capitol Hill aide, both of whom spoke on condition of anonymity because the meeting has not been announced.
The credit card industry has been under intense scrutiny in the past year for practices such as arbitrarily raising interest rates, charging excessive fees and giving customers little time between billing them and requiring payment.
In December, the Federal Reserve approved new rules that would ban such practices. But consumer groups and several members of Congress criticized the Fed's efforts because the new regulations don't take effect until July 1, 2010. Bills have been introduced in both the House and Senate to accelerate that time line.
The congressional committee overseeing the government's bailout is also investigating industry practices, including whether banks that received federal aid have increased fees or tightened rules in recent months.
The White House did not comment on the meeting.
"We have been invited to the White House, and we look forward to a constructive dialogue," said a spokeswoman for Capital One.
Spokesmen for Bank of America and American Express said they could not confirm the meeting. A spokesman for Citibank declined to comment. Phone messages and e-mails to officials at other credit card companies were not returned.
Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable, which represents large banks and insurance companies, said the industry was "looking forward to a frank discussion with the administration about credit cards."
He added that there was "lots of misinformation" about credit card practices and that recent changes in credit card interest rates were largely due to changes in cardholders' risk profile.
"It is easy to demagogue the credit card industry now. The credit card industry is vital to the economy and the recovery effort," Talbott said.
In recent months, several credit card issuers , including Capital One, Bank of America and Citi, have all raised interest rates or cut credit lines for some of their customers.
Most of Bank of America's customers whose rates increased had changes in their risk profile, said Betty Riess, a spokeswoman for the company.
But a small group of customers whose rates were less than 10 percent were told their rates would increase in June because of "current economic conditions," Riess said. "Essentially, our cost of providing credit has significantly increased," she said.
Consumer advocates and congressional leaders said they were pleased that the Obama administration would meet with the card issuers.
"The federal government is assisting the credit card companies in two significant ways, and we would hope this meeting would focus on how the White House can get credit card companies to immediately begin these reforms," said Travis Plunkett, legislative director of the Consumer Federation of America.
"If what we hear about a White House meeting is true, it makes a lot of sense given that President Obama campaigned on credit card reforms and the Fed has already ruled that their practices are unfair and deceptive," said Rep. Carolyn B. Maloney (D-N.Y.), who introduced one of the bills that aims to crack down on credit card practices.