Obama said that while credit cards are an important source of liquidity for consumers and small businesses, "The days of any time, any reason rate hikes and late fee traps have to end."
His remarks were made after a White House meeting with 14 leading credit card executives to discuss the impact of issuers' practices on consumers and the economy.
As credit card issuers grapple with ballooning loan losses, they've raised rates and fees for millions of consumers. From March 2007 through February 2008 alone, about 70 million credit card accounts — nearly one in four accounts — had their rates raised, costing consumers at least $10 billion in additional finance charges, estimates Pew Charitable Trusts, a public policy group.
Obama said he wants to make sure that credit card companies "are able to make a reasonable profit — but they're doing so in a way that is responsible." Issuers who engage in illegal practices will "feel the full weight of the law," he warned.
The administration's efforts lend momentum to pending bills in Congress. Already, the Federal Reserve has issued a rule that would restrict issuers' ability to raise interest rates on existing debt. But the rule doesn't take effect until July 2010. The White House said it's looking for stronger protections than provided by the rule.
Also Thursday, Sen. Charles Schumer, D-N.Y., and Sen. Christopher Dodd, D-Conn., called on the Federal Reserve to impose an "emergency freeze" on issuers' ability to raise interest rates on existing debt. USA TODAY's research has found that for a growing number of consumers, credit card rate increases — rather than mortgage troubles — are pushing them into economic distress.
Ed Yingling, CEO of the American Bankers Association, says that issuers raise rates based on risk. If regulation "goes too far, it would undermine the availability of credit when we're in a credit crisis," he warns.
But Adam Levitin, law professor at Georgetown University, says that absent strong regulation, issuers will devise new ways to boost profits at consumers' expense. "I worry that all this leads to is a game of whack-a-mole, where Congress says, 'Don't do A, B and C,' and the card industry is popping up with another set of practices," says Levitin.
Levitin believes the regulatory system needs a "structural change." Instead of telling issuers what they can't do, regulators should tell them the only things they can do, he says.
By Kathy Chu, USA TODAY------------------------------------------------------------------------------------------------
To report corrections and clarifications, contact Reader Editor Brent Jones. For publication consideration in the newspaper, send comments to letters@usatoday.com. Include name, phone number, city and state for verification. To view our corrections, go to corrections.usatoday.com.
0 comments:
Post a Comment