Obama Pushes Stronger Credit Card Rules
President Barack Obama said Thursday his administration is determined to get a credit-card law that eliminates tricky fine print, sudden rate increases and late fees that give millions of consumers headaches.
"I trust that those in the industry who want to act responsibly will engage with us in a constructive fashion, and that we're going to get this done in short order," Mr. Obama said, delivering a pointed message to leading executives of credit-card issuing companies seated at his side.
But the banking industry is warning that Mr. Obama's push for legislation could backfire, restricting lenders and making less credit available to Americans during the economic crisis.
Both the House and Senate are considering a credit card "bill of rights" to limit the ability of credit-card companies to raise interest rates on existing balances and to require greater disclosure.
"These practices need to be stopped. … They cannot continue to use and do practices that are unfair to people," Rep. Carol Maloney, D-NY, told CBS News.
For cardholders like Carol Chapman, the legislation is overdue.
"I think someone should have done this a long time ago," she told CBS News correspondent Bill Plante.
Chapman said the interest on her card has gotten so outrageous - jumping from 1.9 percent to 29.99 percent - that she's "at the point now I will not pay at all."
The credit card issuers include the same big banks - Bank of America, Citicorp and JPMorgan Chase - that have gotten billions in bailout money meant to stimulate consumer lending, reports Plante.
At issue is how to protect consumers, particularly in a severe economic downturn, while not imposing the kind of rules that could make it harder for banks to offer credit or that put credit out of reach for many borrowers. Industry advocates are wary of those consequences and hopeful Mr. Obama will listen.
Kenneth Clayton, senior vice president for card policy at the Americans Bankers Association, said the concern is that new legislation may make economic matters even worse by shrinking lenders' ability, resulting in "less credit available to vast numbers of Americans" at just the wrong time.
The rising credit default rate has led some banks to increase interest rates or limit customers' credit lines. Credit card delinquency, which measures how many customers are 30 days or more late on payments, hit 5.56 percent in the fourth quarter of 2008, CBS News' Stephanie Condon. The rate has risen 60 percent since 2005, according to the Federal Reserve.
The Federal Reserve has already ordered new rules, to take effect in July 2010, that are designed to enforce a host of new consumer protections.
On Thursday, Sen. Chuck Schumer, D-N.Y., a member of the Finance Committee, and Sen. Chris Dodd, D-Conn., chairman of the Banking Committee, wrote a letter asking the Federal Reserve, the Office of Thrift Supervision and the National Credit Union Administration to use their emergency powers and put next year's planned rules in place immediately.
"Congress is working on legislation to strengthen these rules and provide additional protections for consumers," the senators wrote. "As Congress works to pass this legislation, and before your rules become effective, issuers continue to operate using unfair and deceptive acts and practices."
Almost 80 percent of American households have credit cards. The average outstanding credit card debt for households that have a credit card was $10,679 at the end of 2008, according to CreditCard.com, an online marketplace designed to link consumers and card issuers.
The White House says Mr. Obama is aware of the importance that credit cards hold in many families, particularly as a last option during hard times.
White House economic adviser Larry Summers said over the weekend that the administration wants to curb pitches that addict people to plastic.
"Individuals are going to have to save more. That's why savings incentives are so important," he said. "That's why we need to do things to stop the marketing of credit in ways that addicts people to it and so that our households are again saving and families are again preparing to send their kids to college."
© 2009 CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report. "I trust that those in the industry who want to act responsibly will engage with us in a constructive fashion, and that we're going to get this done in short order," Mr. Obama said, delivering a pointed message to leading executives of credit-card issuing companies seated at his side.
Mr. Obama said he wants legislation that will prevent consumers from facing a sudden, surprising rise in fees. He said credit-card companies must publish their forms in plainspoken language. The president said companies must make it easier for people to do comparison shopping and said there must be greater enforcement so that violators feel the "full weight" of the law.FAQ: Credit Card Rate Hikes
But the banking industry is warning that Mr. Obama's push for legislation could backfire, restricting lenders and making less credit available to Americans during the economic crisis.
Both the House and Senate are considering a credit card "bill of rights" to limit the ability of credit-card companies to raise interest rates on existing balances and to require greater disclosure.
"These practices need to be stopped. … They cannot continue to use and do practices that are unfair to people," Rep. Carol Maloney, D-NY, told CBS News.
For cardholders like Carol Chapman, the legislation is overdue.
"I think someone should have done this a long time ago," she told CBS News correspondent Bill Plante.
Chapman said the interest on her card has gotten so outrageous - jumping from 1.9 percent to 29.99 percent - that she's "at the point now I will not pay at all."
The credit card issuers include the same big banks - Bank of America, Citicorp and JPMorgan Chase - that have gotten billions in bailout money meant to stimulate consumer lending, reports Plante.
At issue is how to protect consumers, particularly in a severe economic downturn, while not imposing the kind of rules that could make it harder for banks to offer credit or that put credit out of reach for many borrowers. Industry advocates are wary of those consequences and hopeful Mr. Obama will listen.
Kenneth Clayton, senior vice president for card policy at the Americans Bankers Association, said the concern is that new legislation may make economic matters even worse by shrinking lenders' ability, resulting in "less credit available to vast numbers of Americans" at just the wrong time.
The rising credit default rate has led some banks to increase interest rates or limit customers' credit lines. Credit card delinquency, which measures how many customers are 30 days or more late on payments, hit 5.56 percent in the fourth quarter of 2008, CBS News' Stephanie Condon. The rate has risen 60 percent since 2005, according to the Federal Reserve.
The Federal Reserve has already ordered new rules, to take effect in July 2010, that are designed to enforce a host of new consumer protections.
On Thursday, Sen. Chuck Schumer, D-N.Y., a member of the Finance Committee, and Sen. Chris Dodd, D-Conn., chairman of the Banking Committee, wrote a letter asking the Federal Reserve, the Office of Thrift Supervision and the National Credit Union Administration to use their emergency powers and put next year's planned rules in place immediately.
"Congress is working on legislation to strengthen these rules and provide additional protections for consumers," the senators wrote. "As Congress works to pass this legislation, and before your rules become effective, issuers continue to operate using unfair and deceptive acts and practices."
Almost 80 percent of American households have credit cards. The average outstanding credit card debt for households that have a credit card was $10,679 at the end of 2008, according to CreditCard.com, an online marketplace designed to link consumers and card issuers.
The White House says Mr. Obama is aware of the importance that credit cards hold in many families, particularly as a last option during hard times.
White House economic adviser Larry Summers said over the weekend that the administration wants to curb pitches that addict people to plastic.
"Individuals are going to have to save more. That's why savings incentives are so important," he said. "That's why we need to do things to stop the marketing of credit in ways that addicts people to it and so that our households are again saving and families are again preparing to send their kids to college."
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"Did Slick Willie hold a gun to their head and force them to write or buy the mortgages?
The truth is these bankers made a business decision to write these loans and it had nothing to do with Bill Clinton. Your argument is totally invalid and has no merit. "
Totally agree. No Canadian banks are in trouble, because they chose to avoid the subprime market and all the complicated ('exotic') derivatives. Even CBS did a story on the Canadian banks quite recently:
http://www.cbsnews.com/stories/2009/04/18/eveningnews/main4954231.shtml?source=search_story
Bottom line: they adhered to fundamental Banking prudence and were not greedy for short term mega profits.
You know, (or maybe not) if you check financial rules a few decades back - say the 50's?
There were USURY LAWS that held that INTEREST charged in excess of I believe around 10 percent depending on the state was a JAILABLE offense.
That was broken by Delaware first where promptly all the credit card companies suddenly moved their headquarters. Not wanting to lose out on the banking GRAVY TRAIN North Dakota stepped up and DELETED their Usury laws to "attract business" and WALLAH!! The credit card banks NEW FRIEND was THAT SELLOUT STATE!
Of course, state by state USURY became the norm and RIPPING of the stupid with the "fine print" became the "American Way".
We did it to ourselves folks. Through GREED, STUPIDITY, short-sightedness and lack of foresight which our forefathers had by far more of than we do today.
We continue to fall for the "divide and conquer" tactics that the Multinational BANKSTERS.
As far as what to do about the National Debt - Here's an idea!
Since the Banksters think it's "fair" to use "bait and switch" tactics - let's DO THAT to the BAILOUT BANKS and USE THEIR "FAIR" PRACTICES ON THEM!
Great daydream there- the CEO and CFO opening that envelope from the US TREASURY with a TON of fine print and scratching their heads - then handing it over to the cadre of lawyers they keep on retainer.
The lawyers blanching white and telling the Banksters that it's a "standard notice" based on what THEY send out to THEIR suckers and after wallowing through all the legalese - they are being TOLD by the US TAXPAYER (THEIR LENDER) that their "teaser rate" of LESS THAN ONE PERCENT is now RETROACTIVELY RAISED to THIRTY PERCENT.....
Not likely but a GREAT turnabout is "fair play" fantasy!
Posted by the74blaster at 6:05 AM : Apr 24, 2009
Exactly.
Posted by janem4 at 4:29 AM : Apr 24, 2009,
Well based on this I take it that you are blaming Clinton for the mortgage mess and the needed bailouts. What is confusing is how did Clinton force the bankers and mortgage underwritters to provide loans to people who are qualified?
Did Slick Willie hold a gun to their head and force them to write or buy the mortgages?
The truth is these bankers made a business decision to write these loans and it had nothing to do with Bill Clinton. Your arguement is totally invalid and has no merit.
The problems were caused by the inability of our government to regulate the mortgage bankers, the investment firms and the credit industry. The accounting methods used to hide things from investors are also to blame. Their should be standard that all accountants must use to report earnings and losses.
The truth is, Bush was totally incompetent and this recession is a product of a failed administration that was more concerned with lining the pockets of the wealthy than managing the domestic policy of a superpower.
A group called Wall Street Watch is out with a report that finds that ?Wall Street investment firms, commercial banks, hedge funds, real estate companies and insurance conglomerates made $1.7 billion in political contributions and spent another $3.4 billion on lobbyists? .
The report, "Sold Out: How Wall Street and Washington Betrayed America," concludes that the contributions were ?aimed at undercutting federal regulation? and ultimately ?led directly to the current financial collapse.?