Consumer groups, lawmakers seek credit card reform
Consumer groups delivered pre-written "Valentine" postcards to lawmakers signed by their constituents seeking no more "outrageous fees," "unfair rate hikes" and hidden interest charges, among other practices.
The postcards single out Bank of America for allegedly sending notices to "good customers" telling them their interest rates will triple, going as high as 28 percent "because no law stands in their way."
"These tactics and games have always angered consumers," Jeannine Kenney of the Consumers Union said at a news conference with lawmakers and consumer groups.
"But in these difficult times, when Americans are struggling to make ends meet, these unfair practices are hitting consumers really, really hard. That's why we're asking Congress along with thousands of Americans to do something about it now when the red flags are waving before disaster hits."
Bank of America spokesman Lawrence Di Rita called the Valentines "misleading" regarding his company.
"Nearly 94 percent of Bank of America credit card customers ended 2007 at or below the rate they started the year," he said in a statement. "Those customers who do get notified of an increase can call us and decline the increase if they pay down the card at the current rate."
Though the prospects for legislation passing this year are uncertain, momentum is building behind Democratic leaders' efforts to curb credit card practices some lawmakers say are unfair.
Democratic Sens. Hillary Rodham Clinton and Barack Obama have made banning interest charges on fees and interest rate increases due to credit rating drops part of their presidential campaign platforms.
Having abandoned his own presidential bid, Sen. Chris Dodd, D-Conn., has pledged to introduce legislation as chairman of the Senate Banking, Housing and Urban Affairs Committee.
In the House, the leading legislative contender appears to be a bill from Rep. Carolyn Maloney, D-N.Y., who chairs the House Financial Institutions and Consumer Credit Subcommittee. It has 61 co-sponsors, including Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee. A March 13 hearing is scheduled.
Backed by consumer groups, the bill would require card companies to give consumers more notice of rate increases and more time to pay bills. It would allow companies to impose only three consecutive over-the-limit fees. But it would not set rate caps, fees or price controls.
"We are saying consumers have the right to make decisions about their own credit," Maloney said at the news conference. "They have the right to make decisions about whether or not they approve of a huge interest increase."
The credit card industry is worried the legislation would have unintended consequences.
"Essentially, it's much broader than meets the eye and it impacts how card products are priced, how we manage risk and frankly our ability to offer low rate alternatives," said Ken Clayton, a credit-card policy spokesman for the American Bankers Association.
"The net effect is basically higher costs to individuals, less access to credit and coming at a very bad point in the economic cycle, operating contrary to the goal of Congress to stimulate it," he said.
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