Obama gets tough on abuses by credit card industry

— -- President Obama pledged Thursday to support legislation that protects credit card borrowers from unfair rate increases and cracks down on issuers who engage in deceptive lending practices.

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.