Democracy Soup

Making sense out of the world of politics

Credit card relief could be coming, but it likely won’t be enough

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Originally published on on Wed, 04/22/2009 – 2:17pm

The battle over credit isn’t just between large banks and large companies. The clashes behind the headlines are getting ugly. Credit card companies jacking up interest rates and fees, not always for a specific reason.

There is some help coming from Washington, but the major issue is whether that assistance will be in the form of a 6-foot rope to a drowning man 18 feet from shore.

The House Financial Services Committee is all set to approve legislation going after “unfair and deceptive” practices by credit card companies.

The bill, sponsored by Rep. Carolyn Maloney (D-NY), would according to CQ Politics, “restrict card companies from computing interest charges on balances from more than one billing cycle; prevent card issuers from suddenly raising rates without advance notice except in specific cases; and allow card companies to decide whether to apply payments in excess of the minimum to the highest interest rate debt, or apportion it equally between all of a cardholder’s debts.”

The Obama Administration wants to strengthen the bill to require information on each bill noting the long-term costs of sticking to just minimum payments, give power to the consumer to determine when in the month the bill will be due, and apply payments beyond the minimum to the debt with the highest interest rate first.

On the surface, Maloney’s bill addresses recent issues due to excessive behavior by credit card issuers, but doesn’t do much to address long-standing issues.

But the administration’s changes — with the exception of applying payments to the highest rate — feel more like the empty symbolism of President Clinton’s school uniforms crusade.

Since credit card legislation has been a difficult path to start down in the first place, the two different strategies emerge over whether it’s better to start out with a strong bill and watch it weaken down in the process, or try the “let’s get a bill, any bill, that will be better than where we are now.” If the goal is to get the bulk of HR 627 through the process — as envisioned by Schoolhouse Rock — of becoming law, which strategy will work best?

The defenses are really strong: Republicans aren’t the only source where there is pressure. Chris Dodd and the Senate ghosts of Joe Biden and Tom Daschle (from key credit card company states) loom large. And the lobbying from credit card companies — of which the last major bankruptcy bill is plenty of proof – is a monster Godzilla wouldn’t even take on in a fight.

If we, as consumers, are going to spend our way out of this recession, we need to have confidence that we can take those risks without being subjected to random, extreme penalties, especially in cases when consumers haven’t done anything wrong. And the protection we thought we had from our government is wafer-thin, and we can see the smiling faces of the credit card issuers on the other side, waiting to get more of our money.


Written by democracysoup

April 22, 2009 at 2:17 pm

Posted in Uncategorized

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