Congress answers calls for credit card fairness, transparency to aid consumers
The Billings Gazette
Many Americans are struggling more than ever to pay their bills. With credit card debts, some customers are finding that their troubles have been compounded by company policies. The most onerous practice is steep increases in interest rates on existing credit card debt, even for people who are current on their credit card bill.
Consumer outrage over that practice and others used by some – not all – credit card companies spurred the Federal Reserve to enact new rules that will take effect next year. Legislation passed by the U.S. House (with strong support from the Obama administration) and upcoming in the U.S. Senate would go faster and further to protect consumers.
Tools for consumers
"It is past time for rules that are fair and transparent," President Barack Obama said Saturday in his weekly radio and Internet address. "Instead of fine print that hides the truth, we need credit card forms and statements that have plain language in plain sight, and we need to give people the tools they need to find a credit card that meets their needs."
Sen. Jon Tester, D-Mont., a member of the Senate Banking Committee, sponsored legislation last year to outlaw "universal default," which is the practice of raising credit card debt interest rates anytime the credit card holder's credit report score drops – even if the customer is current on payments. Tester helped write the Senate bill, which is expected to come to a vote this week.
"Every day, I get calls, letters and e-mails from folks back home who want the Senate to take action to rein in these predatory practices of the credit card industry," Tester said in a Senate address last week. He quoted from two letters, one from a small business in Belgrade where the owner wrote: "These institutions have bilked us. They took the bailout money and had no qualms about undertaking more irresponsible actions to loot the American taxpayers and consumers again. … My interest rate was increased to over 27 percent."
A woman from Glacier County wrote to Tester: "We just saw interest rates on many of our credit cards jump for no reason. … How are we supposed to be participating in an economic recovery when our cash is being siphoned off for these unfair charges?"
Obama called on Congress to pass a credit card consumer protection bill for him to sign by Memorial Day. However, the banking industry opposes this legislation. Credit card executives say new restrictions could backfire on consumers, making it harder for banks to offer credit or put credit out of reach for many borrowers, the Associated Press reported.
Those arguments may be true. If so, the proposed credit card rules still make sense: People who can't afford to repay credit card debt shouldn't get credit cards. Knowing upfront what the costs will be should help consumers make better decisions about making credit purchases in the first place.
As Obama said Saturday, the time for credit card reform is now when "Americans can least afford to bear an extra burden."