President Barack Obama, appealing to mainstream consumers, is pushing for more legal protection for the millions of Americans who use credit cards. Obama was meeting with leaders of the credit-card industry today, and he’s already backing tougher legislation.
“The president believes new rules of the road for the credit card industry are needed,” Obama senior adviser Valerie Jarrett said ahead of the president’s planned session at the White House with executives from the nation’s top credit-card companies.
Obama and some congressional leaders are particularly focused on what they consider to be abusive and deceptive practices that squeeze people into paying much higher fees or interest rates than anticipated. Both the House and Senate are considering a credit card “bill of rights” to limit the ability of credit-card companies to raise interest rates on existing balances and to require greater disclosure.
“These practices need to be stopped. They cannot continue to use and do practices that are unfair to people,” Rep. Carol Maloney, D-NY, told CBS News.
For cardholders like Carol Chapman, the legislation is overdue.
“I think someone should have done this a long time ago,” she told CBS News correspondent Bill Plante.
Chapman said the interest on her card has gotten so outrageous – jumping from 1.9 percent to 29.99 percent – that she’s “at the point now I will not pay at all.”
The credit card issuers include the same big banks – Bank of America, Citicorp and JPMorgan Chase – that have gotten billions in bailout money meant to stimulate consumer lending, reports Plante.
White House aides said Mr. Obama’s meeting with the credit executives is part of a broader outreach to different segments of the business community.
At issue is how to protect consumers, particularly in a severe economic downturn, while not imposing the kind of rules that could make it harder for banks to offer credit or that put credit out of reach for many borrowers. Industry advocates are wary of those consequences and hopeful Obama will listen.
The Federal Reserve has already ordered new rules, to take effect next year, that are designed to enforce a host of new consumer protections.
Almost 80 percent of American households have credit cards. The average outstanding credit card debt for households that have a credit card was $10,679 at the end of 2008, according to CreditCard.com, an online marketplace designed to link consumers and card issuers.
The White House says Obama is aware of the importance that credit cards hold in many families, particularly as a last option during hard times.
Kenneth Clayton, senior vice president for card policy at the Americans Bankers Association, said the concern is that new legislation may make economic matters even worse by shrinking lenders’ ability, resulting in “less credit available to vast numbers of Americans” at just the wrong time.
White House economic adviser Larry Summers said over the weekend that the administration wants to curb pitches that addict people to plastic.
“Individuals are going to have to save more. That’s why savings incentives are so important,” he said. “That’s why we need to do things to stop the marketing of credit in ways that addicts people to it and so that our households are again saving and families are again preparing to send their kids to college.”