Congress Investigating Credit Card Practices
I recently read a Consumer Watch report indicating that the chairman of the Senate’s Permanent Subcommittee on Investigations of the Homeland Security and Government Affairs Committee recently was credited with indicating that regulation and legislation are needed to stop abusive credit card practices. Senators criticized excessive fees and penalty interest rates. They also criticized poor disclosure.
Senator Carl Levin (D-MI) pointed out that by “nickel and diming tens of millions of consumer accounts, credit card issuers reap large profits.” Senator Norm Coleman (R-MN) pointed out that “too many Americans across all economic strata are saddled with high interest rate payments on consumer debt, impeding them from accumulating wealth and achieving their financial goals, including sending children to college and saving for retirement.”
The Board of Governors of the Federal Reserve System reports that credit card debt owed by an average US household has more than doubled since 1992 from $1,000 to $2,200 in 2004.
The credit card industry acknowledges that they could do a better job with disclosure, but defended its pricing practices. The industry says that its approach is “shaped by the market.” Richard Srednicki, the chief executive of Chase Card Services added that risk-based pricing, which can result in higher payments from consumers, is “integral” to the credit card industry.
Citi Cards and Chase announced recent decisions to eliminate repricing under clauses that would allow them to raise interest rates on their cards if the consumer defaults on payments to another provider. They reported that their companies will only raise a customer’s interest rate based on the customer’s behavior with their cards only.
Wow! Debtors attorneys have been saying this for years and these points were all raised in 2005 when the Bankruptcy Abuse Prevention and Consumer Protection Act was passed. Many opponents of the bankruptcy reform legislation wanted to add language to the act that tackled some of these problems. Maybe our legislators have finally gotten wise to this problem.
It also occurs to me that bankruptcy seems to level the playing field a bit for unsuspecting consumers who fall victim to these exorbitant credit card fees and charges.
