Obama Pushes Stronger Credit Card Rules

President Wants Law To Eliminate Deceptive Practices Like Sudden Interest Rate Jumps

(CBS/AP)  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.

---

FAQ: Credit Card Rate Hikes
EconWatch Blog: New Law Proposed

---

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.

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, writes 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."

[cruscntrl]

The cc company argument that this will tighten credit is ridiculous as nothing that has happened has loosened there credit stances anyway. They are closing accounts, reducing limits, raising rates, increasing penalties, restricting payment dates, freezing accounts, increasing credit to debt ratio limitations and not giving anyone credit anyway. In short, they are claiming they are loosing money due to poor decisions on the mortgage debacle and making cc consumers pay for it.

[sfbanak]

Most of us need to get wiser and sstop using credit like charge cards unless we can pay them off each month. We blame the companies; but, it's our own frivolity, bad budgeting, and poor planning that get people in trouble. It's just easier to blame others and not take on the self-responsibility we need to. Having a savings acct for emergencies is wise and mature. Many of us need to grow up and be more responsible. Save for things instead of buying them with credit. AND really look at what we NEED vs. what we WANT.

[ladypirate2]

He should do something about the finance companies and payday loan companies who charge 25 and 26% interest too! I'm paying $205.00 a month to Beneficial Finance. Only about $20.00 goes toward my actual balance and $9.00 a month is for insurance. The rest is for service charges. It's ridiculous! They are sticking it to the consumers! They charge twice what the banks and credit cards charge! What they are doing should be against the law! They should be forced to only charge the same interest rates that banks and credit card companies do!

[ianlou]

Here's how to screw the Banks and the Credit Card Companies.

Get yourself a Home Equity Loan from your local Credit Union that allows you to transfer money into your checking account. Then use your dept card instead of a credit card.
Set up an automatic payment plan to pay off the loan
and keep your ballance reasonable.

No late charges, no wild interest rates based on your driving record or cable TV bill.

Just a consistant 6% interest rate.

I have not done business with a Bank or a Credit Card Company in 20 years.

I hope to Double that record.

[Sky017]

the74blaster said:
"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.

[homespunlady]

My advice - let's ROLL BACK THE CLOCK to the "good old days".
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!

[BeckieBest]

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.
Posted by the74blaster at 6:05 AM : Apr 24, 2009



Exactly.

[the74blaster]

Look up the Gramm bill on wikepedia and read a quote from clinton that he made in 2008 standing behind his support of that bill. It continues to be a riot that you libs take no blame, nothing, for anything that goes wrong. It's amazing.

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.

[pepperwood2]

Well now - imagine that? Now the BO & Congress grandiose plan to have our Credit Cards slapped with additional fees to help pay back the Banks Bailouts has to be put on hold temporarily until they can come up with another scheme. So Sad!

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.?

[emperorlotku]

Sounds like "THE ONE" is going to make a show of overturning the tables at the temple of finance. Should be interesting to see the upsurge in financial campaign contributions and lobbying funding directed towards our politicians and President, coming from the credit card companies, in the meantime. The end result will be as laughable as the 100 million dollar reduction being touted as taxpayer savings that "THE ONE" administration is using as a "goal".

[Void_Master]

And by the way, oldscrazy, I had a very similar situation develop with an HSBC credit card several years ago. I still haven't paid that either. But here is how and why they don't care up front.

In your case, you say that by breaking their own rules (which incidentally sounds like HSBC, too), they caused the account to keep a $54 balance that you knew nothing about. Never for a moment suspect that that was not deliberate on their part. Anyway, here's how it works.

Once they've let the account balance build to a nice juicy sum, $1000+ in your case, they go after you -- already understanding that unless you start paying within the first month or so, you probably never will. So they go through the motions for a while longer until they can find an "investor" to buy the bad paper.

So then the investor pays them 50 cents on the dollar for the account. Voila! The CC company has just made $500 off of $54 they were never entitled to in the first place. Plus, they get to write the "loss" off of their income taxes.

Now that the debt is in the hands of a different party, they are free to come after you anew. And that, incidentally, resets any statute of limitations.

The only way that this scam can be shut down is if Congress makes it illegal to sell bad paper. NO other course of action is going to stop this trick from being played out time and again.

[Void_Master]

Posted by oldscrazy at 10:02 PM
***
Ummm, you're quoting someone else who quoted me. Please see the post by reasoned1955 at 7:12 PM : Apr 23, 2009.

[stychokiller]

Okay, let me get this straight -- these are the same congressional "Leaders" that passed legislation removing the Usury laws that kept interest rates at a reasonable level for most folks and the same "Leaders" that made it harder for an individual to declare bankruptcy? Now we're expected to believe that they're going to make everything all right for the holders of credit cards? I was born in the morning, but it wasn't this morning!

[bigdzcbs]

ITS TO BAD THAT IT TAKES THE BAIL-OUT TO DO WHAT SHOULD HAVE BEEN DONE YEARS AGO, LIKE THE DAY CREDIT CARDS WERE INTRODUCED.. THEN, MAYBE, THERE WOULDN'T HAVE BEEN SUCH A HUGH RATE OF BANKRUPCY FILES EVER SINCE. AND EVEN NOW, THAT RATE WILL GO THRU THE ROOF, THE NEW BANKRUPCIES LAWS WON'T STOP IT.....

[oldscrazy]

"And you, and others like you, are the reason for the mortgage collapse and our financial failures. I respect your anger, but why wouldn't you just pay off the balance and be done with it? Refuse to pay the late fees, heck, refuse to pay any interest. But have enough self-respect to pay the principle--the just debt. Instead, you want me and others to pay for your irresponsibility."
Posted by Void_Master

Sorry, that does not work. I know I tried. 7 years ago I had a cc from a well known company for over 5 years which I always paid off each month. It had a minimal credit limit which I refused to let them raise. Knowing we were fixing to go thorough some hard times, I paid it off at 8am Est,online, Their cut off time for crediting an online payment each day was 2pm est. The next day I called and canceled the card. A year and 1/2 later I suddenly get a notice from a collection agency that I owed a little over $1,000 on that account. How? Easy, they broke their rules and didn't apply the payment till two days after it was made. In the meantime they had charged me a $25 late, charge and interest on the balance and then since it then went over my credit limit, an over the limit fee.After my in full payment was credited it left a balance of about $54. That amount was added to on a monthly basis with fees for being late,and interest and then later when it total hit my original credit limit they started charging an over the limit fee to it too. Not once did I ever receive a statement.
I wrote the collection agency and sent copies proving I didn't owe them a dime. I later talked to them and was told it would be corrected. Another year goes by and then another collection agency contacts me trying to collect on that same account. The process was repeated. After the 3rd year with the same thing happening, I contacted the cc company themselves and thought I had it correct only to have it show on my credit report the following year. I contacted an attorney and was told my options and decided to outlast them till the 7th year. The statue of limitations on open ended debt here is 3 years, so there was no legal recourse for them to get a judgement also had a statement added to all three reporting agencies about the situation. Those statements, I found were only viable as long as that particular collection agency had the account.. Now, when the so called bad credit should have dropped off my credit report in March, I find that the credit card company or this collection agency has re dated it in an effort to keep it on my report. I'm going after them!!!! It certainly does not work to actually pay them what you owed! They are greedy thieves!

[pensacola8-2009]

The interest rate credit debate has been studied in college economics classes. The State of Oregon and Arkansas both had their state legislatures act against high interest rates for consumers.

President Obama is not trying to restrict access to credit for those who are not creditworthy. Instead, he is trying to protect the consumers from high interest payments that consumers are forced to pay after they got into their current debts.

President Obama feels that a consumer who enters a debt with a low interest rate should be able to repay their debt at that interest rate and disallow the creditors from trapping their clients into high debts that can't be repayed as quickly.

I agree with President Obama. This issue affects me.

I supported the bailouts of the banks, but then later saw my interest rates jump form 9% to 36% with thousands in the balance. I feel betrayed and know the banks need to survive, but not this way.

From 401K devaluations to higher credit interest rates, I feel fortunate to be employed, but my paycheck doesn't leave me much room for consumption expenses.

[Void_Master]

Of course it really would be a big step towards communism if the government were to *keep* those assets. And that too would be a bad thing. So what it should do once such assets are seized is run the operation (definitely with different management) until it can sell the assets, businesses, etc. off to a high bidder that is qualified to manage such assets.

[Void_Master]

There really should be a lot more talk of seizing corporate assets when a corporation receives bailout money. Congress seems afraid to and the only "excuses" I've heard or read that seems to support their fear is that it would set a bad precedence for the government to start seizing private assets.

Really? The government doesn't seem to have a problem with seizing the assets of private individuals. And if anything, individuals have priority over any collective entity -- such as say, a corporation.

[Void_Master]

Supposedly, if AIG or the big banks fail, it would cause a collapse of the financial markets world wide, starting in the U. S. But given how they operate, that might just be a good thing.

The bailouts are bad news! Talk about paying for someone else's irresponsibility.

[spaceatoms]

Obama is doing the same thing as any other President, he is feeding the smart and rich and telling the rest to survive out there. Its no different than any other generation with WWI and WWII and Vietnam and now we have Iraq. The main difference are the bailouts, at no time in the past has the government of the U.S. leaned towards socialism and communism like the bailouts. We still are a country that understands that if you lose the game then you pack in your bags and the sarcastic bailouts break this rule. I own a business and if I am not profitable and work hard, then I lose everything, I don't get a bailout, so I don't understand the psychology nor necessity of having AIG on the map.