Capitol Hill Takes on Credit Cards

Today is one of the rare days when I wish I could watch C-Span. I'd be glued to the tube watching the Senate Permanent Subcommittee on Investigations, which is holding hearings on widespread credit card abuses. I can't wait for tonight's evening news shows, so I can catch up on who said what. (I know … I sound like a total geek!)

These hearings are partly based on a September 2006 Government Accountability Office report with the catchy title, "Credit Cards: Increased Complexity in Rates and Fees Heightens Need for More Effective Disclosures to Consumers." The GAO found several questionable finance charges, fees, and disclosure practices among the 28 popular credit cards it studied.

The report also points out just how deep a hole we've dug for ourselves over the last 25 years. With the credit card industry's help, we went from charging around $69 billion a year on our cards in 1980 to over $1.8 trillion a year in 2005. Our increased use of plastic has, of course, added to the expansion in household debt, which grew from $59 billion to some $830 billion during the same time period.

The senators, led by Subcommittee Chair Carl Levin, are exploring the possibility of new legislation to stop the highly profitable credit card industry from taking advantage of people who can least afford their over-the-top interest rates and fees.

I thought I'd check out how the hearings were playing in the business community, so I surfed on over to Forbes.com. What I read on the "HOME PAGE FOR THE WORLD’S BUSINESS LEADERS" was music to my ears:

"The credit card industry has among the lightest regulation in the nation, and lawmakers appear ready to give federal regulators more power to tame companies' lending policies if necessary. But they are also hoping that by working with the largest credit issuers, such as Citigroup, Chase Card Services, MBNA America, Bank of America and Capital One Financial … that a change in industry practices will have a trickle down effect to smaller lenders."

Chances are, the bank execs who testify will, for the most part, defend their practices as responsible, and based on sound business principles. They'll probably point to recent examples of lenders having begun to improve the system on their own. While some banker will no doubt apologize for some egregious 'error," I don't expect any of them to speak in favor of new legislation.

Americans for Fairness in Lending
Many consumer advocates will be testifying as well, and they will be pressing for new legislation to eliminate reckless and abusive lending by credit card companies. Organizations such as the Consumer Federation of America, Consumer Action, Demos, NAACP, National Council of La Raza, and the UAW have joined forces to form Americans for Fairness in Lending (AFFIL), which wants among other things, as Forbes.com puts it:

"an end to the practice of retroactive rate increases (essentially applying higher interest rates to existing balances), mandatory arbitration clauses, which prevent consumers from taking companies to court, and an end to universal default.  From a consumer's standpoint, none of these seem like unreasonable requests."

I don't know about you, but when Forbes.com points out that the credit card industry has "among the lightest regulation in the nation" and that none of the legislative changes consumer advocates want "seem like unreasonable requests" – I get the feeling that maybe even the business community realizes that it's time for some big changes –  ones that will make life much easier on cardholders.

What changes would you like to see Congress enact to make lending and borrowing fairer, safer and more consumer friendly?

Comments

[dave michele]

I came across your blog in Debtcc Blog Hunt. Is Debt consolidation always helpful?please help me out.

[Nancy Castleman]

Debt consolidation can be VERY helpful -- if you're serious about getting out of debt and you choose wisely. There's a great chart on Credit.com that outlines the alternatives: http://www.credit.com/products/debt/dh-comparison-chart.jsp

Good luck!
Nancy

[Adam Kochanowicz]

I've been following this issue very closely, do you have a facebook? I've organized an online group to organize concerned Americans with links to recent news reports and ways to contact their representatives, I encourage you to join:

http://unomaha.facebook.com/group.php?gid=2257128717