Momentum to grow against credit cards & government lobbying
April 22, 2009 by admin
The momentum continues to grow as consumer outrage finally may be sinking in with the leaders of Congress. Representative Carolyn Maloney out of New York is making another push for the passage of the Credit Card Holders Bill of Rights. This bill contains similar language to the reforms the Federal Reserve put in place for the credit card industry, but pushed backed the implementation until 2010. The major parts of the bill include:
• Implementing a ban on arbitrary interest rate increases that are applied to existing card balances (such as the notice sent to Bank of America customers last week)
• Bans on double-cycle billing and charging subprime card fees to the account
• Requiring the credit card issuer to notify the borrower of rate increases forty five days in advance
• A new proposal that would a Require the card issuer to allow consumers to set their own credit limits
• Strengthen the terms proposed in the Fed rules
• Forbid the practice of applying payments to low-rate balances first
The likelihood of the credit card reform moving forward will be an interesting exploration of politics versus the bank lobbying firms. Today, it was reported that in the first quarter of 2009 alone, companies that have received funds through the TARP and the TALF have spent over ten million dollars lobbying government officials. This money, essentially on loan from American taxpayers is being recycled back into the hands of government officials who are responsible for representing their constituents. Some of the companies outlined in the report include JP Morgan, Bank of America and General Motors. The effect of bank lobbying and their ability to influence the government’s proposed political reforms were in the spotlight earlier this year as many banks and financial firms spent big dollars persuading the government not to move forward with many of the proposed restrictions to executive bonuses and retention bonuses for companies that have received federal aid. Despite, the outrage caused by AIG executives receiving bonuses well over one hundred million dollars, there was more political posturing than actual reform, thanks to the efforts of the bank lobbyist. The credit card industry is one of the most hotly debated topics by consumer groups and large banks, which will have to provisions hundreds of millions of dollars for losses in these portfolios over the next two years with the downturn in the economy. There will be a lot of discussion in Washington over reforms, whether these get passed into law will be a matter for Congress to decide.