by Sally Greenberg, NCL Executive Director
Three cheers for President Obama’s speaking out publicly against some of the worst abuses in the credit card industry. Mr. Obama called to the White House the heads of banks issuing these cards and gave them a dressing down. No more “anytime, any reason rate hikes,” he said. Credit cards companies should offer a “plain vanilla, easy to understand, simplest terms possible” card for the average user, and not bury hidden charges and fees in the fine print of the contract.
Consumer groups have long urged Congress to reform the most odious practices of the credit card industry, including calling for a ban on mandatory arbitration clauses in all their contracts and barring class actions for users who have complaints against their credit card issue. We’ve called for bans on universal default – a practice that sends your credit card interest rates up if you default on another unrelated payment, say your mortgage. In a recent Washington Post article, a reader who had perfect credit but miscalculated her payment date and was two days late on a bill saw her interest rate shoot up. She was told this hike was “automatic.”
We applaud the President for using his bully pulpit to call out the rampant abuses in this industry. Earlier this year, the Federal Reserve issued regulations to curb many of these abuses, but those rules won’t go into effect into effect next year. NCL has joined with a host of other consumer groups in a letter to Congress supporting House and Senate bills to codify into law many of the Fed’s rules. Among the bills’ features are banning interest rate increases on existing balances unless payment is more than 30 days late and forbidding “double-cycle billing,” the practice of charging interest on debts paid off the previous month. The bills would require 45 days’ notice for a rate increase on your credit card account.
We hope the President will weigh in with Congress in support of these all-important issues. His voice will be needed to overcome the vocal opposition from the industry and their supporters in Congress.