Obama Joins Credit Card Reform Debate

President Obama met with representatives of the credit card industry April 23 and outlined core principles that he would like to see included in legislation currently winding its way through Congress.

Obama called for strong and reliable protections for consumers that ban unfair rate increases and forbid abusive fees and penalties. In addition, the president urged an end to confusing terms and conditions and stressed that all forms and statements use “plain language that is in plain sight.”

Credit card companies must also be required to make their contract terms easily accessible and must provide consumers with the necessary information so that they can comparison shop. Firms must also be required to offer at least one simple, straightforward credit card that offers the strongest protections along with the simplest terms and prices, the president said.

Obama also pressed for increased accountability in the system, which he noted would require stronger monitoring and enforcement, and penalties for violations of the law.

Meanwhile, Senate Banking Committee Chairman Christopher Cox, D-Conn., and Sen. Charles Schumer, D-N.Y., have called on federal regulators to implement an emergency freeze on interest rates tied to existing balances on credit cards.

Writing to Federal Reserve Board Chairman Ben Bernanke and other regulators, the senators note that the Fed has already issued a new regulatory rule that would ban the practice of retroactively raising the interest rates on existing credit card balances. However, the rule is not scheduled to take effect until July 2010, giving companies more than a year to raise rates on consumers preemptively to get under the deadline, the senators warn.

Schumer and Dodd said the Fed should invoke its emergency powers to make the rule effective immediately. “Over the past year, the Federal Reserve has cited the financial crisis as one of the reasons for acting quickly to implement new lending facilities and programs to protect financial institutions. It is long past time for the regulatory agencies to act with the same sense of urgency to protect consumers from the behavior of those same financial companies,” the senators wrote.