Personal Finance and Money Management

In an effort to protect American consumers against abuse from credit card companies, President Obama spent time this week meeting with executives from more than 10 different credit card issuers. The executives came from major issuers including Visa, MasterCard, and American Express, along with executives from large banks that issue these cards to customers. Credit card companies have made negative headlines the last few months as a result of altering terms and interest rates associated with consumer credit card debt.

Lawmakers in the House Financial Services Committee approved a bill this week that would impose limitations on the ability of credit card issuers to alter terms and conditions for credit card customers. The bill deals with excessive fees, bans arbitrary interest rate increases, and makes sure that card companies are being clear in disclosing details to their customers. The bill is expected to progress through the House and Senate in the next 1-2 weeks.

During his presidential campaign, President Obama often mentioned his stance that credit card holders should have a bill of rights to prevent scenarios like the one JP Morgan Chase is accused of, where they offered attractive, zero-interest balance transfers to entice potential new customers and then changed the terms of the transferred balance once the funds arrived. They recently paid a $300 million settlement related to this practice.

Lobbyists working in behalf of credit card companies are urging lawmakers to let the free market operate on its own. Card companies have used the ability to raise rates with customers who suddenly began engaging in riskier credit behavior. With an increasing number of cardholders falling into default, credit issuers have been raising rates across the board to make up for increasing defaults.

There is already one law on the books aimed at protecting consumers from abusive credit practices, but it is not scheduled to become effective until the summer of 2010. Some lawmakers are considering using legal means to freeze credit lines and interest rates where they are today until that law becomes enforceable.

In his remarks about the meetings with credit card executives, President Obama said, “We want to preserve the credit card market, but we also want to do so in a way that eliminates abuses and problems that a lot of people are familiar with.”

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Tags: Abuse, Credit Card