Obama Moves To Protect Card Users

President Calls For New Federal Crackdown Against Abuses By Credit-card Companies

April 24, 2009|By Janet Hook | Janet Hook,Tribune Washington Bureau

WASHINGTON - Building on populist anger against the nation's financial institutions, President Barack Obama called Thursday for new federal rules to crack down on credit-card companies that jack up interest rates and otherwise take advantage of unwary consumers.

"There has to be strong and reliable protections for consumers, protections that ban unfair rate increases and forbid abusive fees and penalties," Obama said after a White House meeting with credit-card company executives. "The days of any-time, any-reason rate hikes and late-fee traps have to end."

The White House move, strongly opposed by leaders and lobbyists in financial services, builds on congressional efforts to shield consumers from higher and often unexpected costs at a time when families are feeling a financial squeeze - and are lashing out against banks and other institutions seen as contributing to the economic meltdown.

As early as next week, House Democrats expect to act on a bill that would make it harder for the industry to impose new fees and rates on card holders and also require clearer disclosure of the costs and risks for users. The bill would codify and expedite rules proposed by the Federal Reserve Board, but which would not be implemented until 2010.

Legislation pending in the Senate would go further, barring lenders from imposing interest rate increases on existing balances.

The push opens a new front in Democrats' efforts to present themselves as consumer guardians at a time of widespread public anger at financial institutions.

In the past, the industry has enjoyed considerable success in blocking new rules and restrictions on how it operates. And it is girding for a major battle this time, backed by many congressional Republicans.

Credit-card executives argue that fees and charges are necessary to protect their profitability while assuring broad access to credit.

Edward Yingling, president of the American Banking Association, said after the meeting with Obama that the industry was already laboring to carry out the rules proposed by the Federal Reserve despite concerns that they would be "likely to shrink credit availability and result in increased rates for some consumers."

Any new regulation should "achieve the right balance between enhancing consumer protections and ensuring that credit remains available to consumers and small businesses at a reasonable cost," he said.

The president said the problem he wanted to address was "people finding themselves starting off with a low rate and the next thing they know their interest rates have doubled; fees that they didn't know about that are suddenly tacked on to their bills - a whole lack of clarity and transparency in terms of the terms and conditions of their credit cards."

Consumer advocates and other opponents of the industry's practices expressed delight that Obama spoke out on the issue, about which he had largely been silent.

"His comments are outstanding," said David Arkush, director of Public Citizen's congressional watchdog unit. "He goes beyond even what the bills in Congress do" in demanding more disclosure and oversight of credit card agreements.

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