President Obama held an unprecedented meeting on Thursday with 14 of the country’s top credit card executives to discuss what he called the unfair practices of the industry.
Chances are you know what the President is talking about. From surprise rate hikes to lowered credit limits to new fees, the credit card companies are playing offense in the face of a deteriorating credit environment and unstable economy.
But many feel like they’re overstepping their bounds in their relationship with consumers. Take John Ulzheimer, our own resident credit guru with pristine credit scores and an immaculate credit history. For the second time in months, he got a letter from his credit card issuer informing him that his credit limit has been cut in half for “under-usage.” (Watch the Web Extra where he re-enacts his phone call to the credit card company here). If Ulzheimer has to play hard ball with the credit card industry, then we’re all in trouble.
After the meeting, President Obama told reporters how important he believed it was for consumers to be offered protection from rate hikes for no reason and fee traps. He urged the credit industry to re-write their forms in plain English. “No more fine print, no more confusing terms and conditions,” Obama said. “We want clarity and transparency from here on out.”
Over on Capitol Hill, Senators Chris Dodd (D-CT) and Chuck Schumer (D-NY) drafted a letter to Fed Chair Ben Bernanke asking him to use his authority to immediately freeze credit card rate hikes. Sen. Dodd already has a bill moving through the Senate that would increase the protections offered in the Credit Cardholder’s Bill of Rights (to take effect in July 2010) including making it illegal to aggressively market credit cards to minors under 21.
Indeed, the packages of legislation being drummed up in Congress and the White House amount to the largest crackdown on the credit card industry in history. Ulzheimer sees similarities between this push for reform and the government’s intervention into the tobacco industry in the ‘90s. It will force change, he says, the question is just about what kind of change we’ll see and when.
In the video at left, Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable, the industry group that lobbies on behalf of lenders, states the case on behalf of the credit card companies, saying that they are happy with the President's desire for reform and are making changes based solely on risk in the marketplace and not for revenue-generating purposes. Ulzheimer takes issue with this assertion, claiming that Talbott’s point is null and void if the companies are raising rates and cutting limits on good customers and not just those who pose a risk of defaulting.
Watch the video segmentfor the full debate, including commentary from Jared Bernstein, chief economist for Vice President Biden.
To see past OTM blog posts on the credit crackdown, click here.