Obama Calls for an End to 'Abusive' Credit Card Lending
After meeting with credit card execs, Obama lays out goals to help consumers.
April 23, 2009— -- Surrounded by some of the country's top credit card company executives, President Obama today called for an end to "unfair rate increases," "abusive fees" and "confusing terms and conditions" facing American consumers.
"I think there has to be strong and reliable protections for consumers -- protections that ban unfair rate increases and forbid abusive fees and penalties," Obama said. "The days of anytime, any-reason rate hikes and late fee traps have to end."
Top White House brass were also in attendance, including economic adviser Larry Summers, who fell asleep during Obama's remarks, according to a White House press pool report.
The president called the meeting "constructive."
"We are confident we can arrive at something that is common sensical, something that allows the industry to continue to provide loans and to run a stable business model that's not dependent on bubbles, that's not dependent on people getting overextended or finding themselves getting in over their heads," he said. "I trust that those in the industry who want to act responsibily will engage with us in a constructive fashion and that we're going to be able to get this done in short order."
In addition to limits on rate increases and late-term penalties, the president called for companies to disclose the terms and conditions of credit cards "in plain language" and "in plain sight."
"No more fine print, no more confusing terms and conditions. We want clarity and transparency from here on out," he said.
He also proposed that each card issuer might issue "a plain vanilla, easy-to-understand" credit card "that the average user can feel comfortable with."
There should also be more accountability for card issuers, he said. Those who break the law, Obama said, "will feel the full weight of the law."
Obama's proposals may come as welcome news to people like Trish McComas and Daniel Doucette.
McComas, 69, a retired widow in Indianopolis, and Doucette, 54, an engineer in suburban Cincinnati, both have recently seen their credit card interest rates spike above 20 percent -- 29.4 percent for McComas and 23.9 percent for Doucette -- even though both say they're always on time with their payments.
McComas said she was "appalled," while Doucette said he was stunned credit card companies were allowed to do that.
"Your interest rate goes from 7.9 percent to 23.9 percent because they can," he said. "It just amazes me that the government would even allow that process to happen."
Whether the government will, in fact, allow such hikes to keep happening is a popular topic in Washington, D.C., these days.
The Federal Reserve and other government agencies have already announced new credit card rules, including limits on when banks are allowed to raise interest rates, but they don't go into effect until next year.
Legislation by Congress -- including measures sponsored by Sen. Chris Dodd, D-Conn., and Rep. Carolyn Maloney, D-N.Y. -- could institute similar rules sooner. Obama supports efforts by Congress to pass new regulations, White House press secretary Robert Gibbs said today.
"The president noted that the Fed is going to take a certain amount of action and Congress is likely to take additional action," he said. "The president supports that additional action and will be working in Congress to ensure that that reaches his desk very soon."
Recent rate increases and other fee hikes by banks have been especially unwelcome given the billions that taxpayers have spent shoring up now-profitable banks through the government's Troubled Asset Relief Program, critics say.
The American Bankers Association, a bank industry group that attended the meeting, said in a statement issued today that banks were working hard to implement the rules announced by the Federal Reserve.
But banks contend that they still have recession-related woes: Though several major banks have announced higher-than-expected profits for the first three months of the year, they're also seeing escalating losses in their credit card businesses thanks in part to consumers who default on their credit card loans.