As scheduled, President Obama met with 14 top executives from the nation’s largest credit card companies at the White House last week seeking to pressure them into accepting changes — some voluntarily, some through legislation — that could cut heavily into profits at a financially difficult time. Attendees described the half-hour meeting in the Roosevelt Room as cordial and nonconfrontational. Obama expressed concern about certain credit card policies, and although some issues were addressed in new laws recently adopted by the Fed that go in affect next year, he feels that the government needs to go further.
“I know you feel that anything beyond what the Fed has done would be overkill,” the president was quoted by one participant as saying. “I just disagree.” “We’re at a time where issues of credit and how businesses and families are able to finance everything from a car loan to a student loan to just paying their bills every day is on a lot of people’s minds,” the president said. “We want to preserve the credit card market, but we also want to do so in a way that eliminates some of the abuses and some of the problems that a lot of people are familiar with.”
Obama said that the government needs to ‘create a new equilibrium’ because the industry is ‘ouf of balance’. The meeting laid out four principles to reform the industry by simplifying the process and ending practices such as high fees and interest rates.
- Eliminate fine print. Produce statements and fee terms in clearly written language, avoiding confusing terms and conditions.
- End ‘any time-any reason’ rate hikes.
- Enforce better oversight of the laws governing the industry.
- Enact a law requiring a plain, easy to understand credit card for the average user
The American Bankers Association has taken issue with the new regulations. “The Federal Reserve itself has indicated these rules are likely to shrink credit availability and result in increased rates for some consumers,” ABA President Edward Yingling said in a statement. “The goal of any additional efforts should be to achieve the right balance between enhancing consumer protections and ensuring that credit remains available to consumers and small businesses at a reasonable cost.”
Some Republicans are also expressing concern including Rep. Scott Garrett, R-NJ, a member of the House Financial Services Committee, who see the new rules having negative consequences, even though they are well intended. “There’s no one on either side of the aisle who does not want to have more transparency so that people know what they’re getting into and what they’re dealing with,” Garrett told CBS News. “But with the credit market already tightening, now is not the time to make it even more difficult for the moderate-income family, with even more reasons to rely on his credit card, to find out he can’t get one. But one benefit (of the current regulatory change) is it goes into effect later on, and we can hope the recession we’re in now will be loosening up for other reasons,” he said. “Once they go into effect, I think they will have a dampening effect on the availability of credit.”
On another front, while Obama was meeting with credit card executives, Senators Chris Dodd, D-Conn. and Chuck Schumer, D-NY called on the Fed to implement an emergency freeze on interest rates tied to existing credit card balances, believing that the implementation of the July 2010 regulations is too far in the future. Rep. Garrett said implementing any of the Fed’s new rules immediately, as Dodd and Schumer are requesting, would only exacerbate the impact.
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