Obama Presses for Credit Card Reform

Making good on a campaign trail promise, President Barack Obama met with top executives from 14 credit card companies today at the White House and urged them to adopt more consumer friendly practices and put an end to “any time, any reason rate hikes and late fee traps.” He also called for more accountability and transparency in documents that describe credit card terms and conditions.

“No more fine print, no more confusing terms and conditions,” he said. “We want clarity and transparency from here on out.”

The meeting came one day after the House of Representatives’ financial services committee passed the Credit Card Holders’ Bill of Rights (H.R. 627), sponsored by committee Chairman Barney Frank (D.-Massachusetts) and New York Rep. Carolyn Maloney.

That legislation would impose limits on raising card fees and rates and require broader disclosure of information to consumers. In addition, it would restrict companies from computing interest charges on balances from more

than one billing cycle and require a 45-day notice of any rate hikes. Lawmakers have agreed to include some administration amendments in the bill when it goes to the floor for a full vote next Thursday.

The president has indicated that he would like to see added to the legislation additional protections that ban unfair rate increases and forbids abusive fees and penalties; provides forms and statements written in plain language; easily accessible contract terms that will enable consumers to go online and comparison shop for credit card offers; and enhanced monitoring, enforcement, and penalties for companies that violate the law.

Obama said that because credit cards are an important source of unsecured debt for both individuals and small businesses, it is important to preserve that market. The Federal Reserve estimates that close to 80% of US families have credit cards.

“But we also want to do so in a way that eliminates some of

the abuses and some of the problems that a lot of people are familiar with,” said Obama, such as doubled interest rates and fees consumers were unaware of being suddenly tacked on to their bills. He also expressed confidence that lawmakers and credit card issuers can reach a “commonsensical” agreement that will enable the industry to operate in a way that’s not dependent upon bubbles or consumers over-extending themselves.

Late last year, the Federal Reserve adopted sweeping new rules that aim to protect consumers from arbitrary hikes in interest rates or inadequate time provided to pay their bills slated to go into effect in 2010. But the president and lawmakers on Capitol Hill appear to want to go further.

In a statement issued by the American Bankers Association, President and CEO Edward Yingling, said that credit card companies are working hard to implement new federal regulations, “although the Federal Reserve itself has indicated these rules are

likely to shrink credit availability and result in increased rates for some consumers.” Any additional efforts, Yingling said, should balance the need to enhance consumer protections with ensuring that credit continues to be affordable.

In a Thursday press conference, Maloney said that she held extensive meetings with credit card issuers and consumers when crafting the bill, which she says balances consumer protections with free market principles, and levels the playing field for credit card issuers that have already voluntarily made changes.

The House passed a similar bill last year that failed to get through the Senate. In light of the millions of people who are struggling through the current economic downturn, Maloney says she strongly believes that this time around it will pick up more Republican support because their constituents are hurting just as badly as Democrats’, and eventually reach the president’s desk.

CBC member Mel Watt of North Carolina, who sits on the financial committee,

agrees. “Obama is viewed as a good barometer of where the public is. At this point, his popularity is high and if he believes that something is responsible or irresponsible and he says it, that adds credibility to what we are doing,” said Watt. He believes the president’s support will play a critical role in getting the bill through the Senate. “We [House members] don’t have much credibility with the Senate, but I think the president does,” said Watt.

RNC Chairman Michael Steele issued a statement late in the day that said, “It is the height of hypocrisy for President Obama to summon credit card company CEOs to the White House woodshed when his own reckless spending and borrowing is piling debt onto the federal government’s credit card at an astronomical rate. The president’s budget alone would result in a $9 trillion deficit and leave American families indebted to China and countries in the Middle East.”