President Barack Obama, appealing to mainstream consumers, is pushing for more legal protection for the millions of Americans who use credit cards.
Obama was meeting with leaders of the credit-card industry Thursday, and he’s already backing tougher legislation.
“The president believes new rules of the road for the credit card industry are needed,” Obama senior adviser Valerie Jarrett said ahead of the president’s planned session at the White House with executives from the nation’s top credit-card companies.
Obama and some congressional leaders are particularly focused on what they consider to be abusive and deceptive practices that squeeze people into paying much higher fees or interest rates than anticipated. Both the House and Senate are considering a credit card “bill of rights” to limit the ability of credit-card companies to raise interest rates on existing balances and to require greater disclosure.
White House aides said Obama’s meeting with the credit executives is part of a broader outreach to different segments of the business community.
At issue is how to protect consumers, particularly in a severe economic downturn, while not imposing the kind of rules that could make it harder for banks to offer credit or that put credit out of reach for many borrowers. Industry advocates are wary of those consequences and hopeful Obama will listen.
The Federal Reserve has already ordered new rules, to take effect next year, that are designed to enforce a host of new consumer protections.
Almost 80 percent of American households have credit cards. The average outstanding credit card debt for households that have a credit card was $10,679 at the end of 2008, according to CreditCard.com, an online marketplace designed to link consumers and card issuers.
The White House says Obama is aware of the importance that credit cards hold in many families, particularly as a last option during hard times.
Kenneth Clayton, senior vice president for card policy at the Americans Bankers Association, said the concern is that new legislation may make economic matters even worse by shrinking lenders’ ability, resulting in “less credit available to vast numbers of Americans” at just the wrong time.
White House economic adviser Larry Summers said over the weekend that the administration wants to curb pitches that addict people to plastic.
(Source: CBS News)
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All the president can do is nag (the so called “Bully Pulpit”). The authority to “make all laws” lies with the Congress, or the states. While he has some legal influence over banks whose survival is based on the government loaning them money, this is an issue that the Congress and the state legislatures are supposed to deal with.
Bank regulators should tell banks to stop loaning to people who can’t repay the loans, rather than the current practice of charging high interest and fees to make up for bad loans. The laws requiring the government to seize banks being operated in an “unsound” manner go back to at least the 19th century, and loaning money to people who can’t repay seems to be inherently unsound.
Usury laws were the norm until recently. Charging 20% annual interest when inflation is zero is probably usurious from any perspective.