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Obama Seeks Reform of Credit Card Firms' Practices
The bill sent to the House floor yesterday would codify new Federal Reserve regulations aimed at curbing credit card abuses. A separate bill in the Senate, sponsored by Banking Committee Chairman Christopher J. Dodd (D-Conn.), would go even further, prohibiting companies from applying a variety of charges. The measure includes capping over-limit fees at one per billing period, allowing no interest charges on fees and no fees to make a payment. The legislation also would prevent companies from raising interest rates at any time for any reason and limit aggressive marketing by card issuers aimed at borrowers under 21.
Administration officials said Obama wants to go further than the House bill without specifically endorsing all of the provisions of Dodd's bill. The officials confirmed that the president will push for stronger rules in some areas than those proposed in the legislation but is "broadly supportive" of the bills working their way through Congress.
The message that bank executives were braced to receive from the president is that he believes the marketplace is unfairly stacked against the consumer, with credit card companies able to change the terms of their customers' agreements at any time without any penalty.
"They truly believe that there needs to be changes in the marketplace to address concerns that will be raised," Clayton said.
Obama has been calling for new regulation of credit card lending since his days on the campaign trail in 2008 and 2007. Geithner endorsed curbs on the credit card companies in remarks several weeks ago.
Flying back from Iowa aboard Air Force One yesterday, press secretary Robert Gibbs said the president's goal is to put an end to the practices that anger consumers.
"So that if somebody gets a credit card, they don't find that their rates go up exponentially on a certain day based on fine print in a contract that no one is ever going to read, or that we find out that certain fees -- you know, interest is charged, an interest rate is charged on certain fees involved in a credit card," Gibbs said.
"He's going to outline and go through some principles of what he would like to see and that he believes Congress can get done in order to protect the American people," Gibbs added.
Also today, Dodd and Sen. Charles E. Schumer (D-N.Y.) called on federal regulators to implement an emergency freeze on interest rates tied to existing balances on credit cards. The Federal Reserve's new rules would limit such rate increases, but not until July 2010.
"Over the past year, the Federal Reserve has cited the financial crisis as one of the reasons for acting quickly to implement new lending facilities and programs to protect financial institutions. It is long past time for the regulatory agencies to act with the same sense of urgency to protect consumers from the behavior of those same financial companies," the senators wrote in a letter to Federal Reserve Chairman Ben S. Bernanke and other regulators.