Finally, the Obama administration is trying to rein in the credit card companies. Because congress is at the beck and call of the credit card lobbyists, they have been stalling on enacting any credible credit card reform. Even though the U.S. Federal Reserve has already drawn up new rules to protect consumers, they aren't scheduled to take effect until July 2010.
Get this quote from Edward Yingling, president of the American Bankers Association, the banking industry's lobbying group. "The [banking] industry understands the concerns about credit cards, but the administration should fully recognize the impact of the Federal Reserve Board regulation, which is one of the strongest consumer- protection regulations ever adopted". Yeah, right.
In the meantime, the credit card companies are having a field day! They are cranking up rates to usurious levels, Many people who have been stellar credit users are suddenly finding that, because of actions taken by the credit card companies, their credit scores are being destroyed, their credit histories being compromised. In effect, the credit card companies are destoying peoples financial reputations.
All of this is happening while the American, indeed the world's economy, is in a fragile state. People whose finances are being strained due to current circumstances, are finding that their "last resort" source of security, their credit ratings, are being furtively stripped from them. The credit card users who have played by the rules, been responsible, and proactively constructed a credit history in the proscribed manner, are having the rules changed on them, to their extreme detriment.
Particular criticism is due to those Banks that raised rates on some existing card holders even as the banks received federal bailout funds. The lame excuses put forth by the banks, is that "credit-market conditions" and "changes in borrowers' credit scores" necessitated the increases. Let us remind them: the "credit-market conditions" and "changes in borrowers credit scores" are for the most part due to the shenannigans and deceptive practices of the credit card companies themselves. They created the problems, then want to punish the consumers by increasing rates and lowering credit limits, because of the effects their policies have had on the credit consumer.
President Obama is taking action now! On Sunday, on NBC's "Meet the Press", Larry Summers (Pres. Obama's top economic advisor) quoted Obama's statement that "people have been deceived into paying extraordinarily high rates that they wouldn't have paid if they knew what they were getting themselves into". Tomorrow, (Thursday, April 23, 2009) President Obama, Summers, and several other key economic officials, including Treasury Secretary Timothy Geithner, are meeting with top executives at banks with large credit card divisions. Let us hope that some real reform comes out of this meeting.
During his presidential campaign, Obama laid out a pro-consumer credit card reform plan. Currently, the administration is backing legislation to crack down on credit card companies, including major players like VISA and MasterCard, that hike interest rates on unsuspecting customers. Obama also wants to establish a credit card "bill of rights" that would ban universal default, prohibit unilateral changes to contracts and also prohibit credit card issuers from charging interest on fees.