Obama Outlines Credit Card Reforms
Thursday, April 30, 2009
The Obama administration yesterday called for an end to unfair credit card industry practices such as retroactive interest rate increases for any reason, late-fee traps that penalize borrowers with weekend or middle-of-the-day deadlines and teaser rates that last less than six months.
In a written statement released by the Treasury Department, the administration outlined practices it would like Congress to reform as it considers two bills that would crack down on the industry. One proposal would force card companies to apply payments above the minimum amount to the highest interest rate debt. To crack down on over-limit fees, the administration would also like Congress to require card companies to get customers' permission to set up accounts so transactions over the limit can still be processed.
To increase transparency, card issuers would periodically have to post information online about rates, fees and other terms. Regulators would also be required to formally request public input on market trends and consumer protection on a biannual basis.
"We need to clarify the rules of the game," Treasury Secretary Timothy F. Geithner told reporters after meeting with civil rights leaders, consumer advocates, and Rep. Carolyn B. Maloney (D-N.Y.), whose Credit Cardholders' Bill of Rights is scheduled for a House vote today. "This administration and this Congress are committed to changing the system."
Geithner said the administration supports both Maloney's bill and another one that the Senate is considering. Maloney's bill closely resembles new rules approved by the Federal Reserve in December, which do not go into effect until July 2010. Neither bill, however, has all of the elements that Obama has requested.
Yesterday's meeting came a week after Obama met with the heads of the largest credit card companies at the White House. He has called credit card reform a key element in reviving the economy.
"Overall, I think the administration's push for credit card reform is making a huge difference in Congress and it's creating a real sense of urgency that Congress needs to act immediately," said Travis Plunkett, legislative director for the Consumer Federation of America, who attended the closed-door meeting with Geithner.
Banking officials have resisted change, warning that it would have the unintended consequence of forcing them to restrict lending or raise rates and fees because it would be more expensive to do business.
"Credit card issuers are committed to delivering the reforms outlined by federal regulators," said Edward L. Yingling, president of American Bankers Association. "And we are committed to working with policymakers toward a balanced solution that does not disrupt economic recovery efforts or do more harm than good for American consumers and small businesses."