Thursday, April 23, 2009

The Table is Set for Credit Card Relief

Our nations banks have come under increasing pressure and scrutiny over raising their credit-card rates in recent weeks. Consumer groups are particularly critical of those that raised rates on most existing cardholders while the banks received federal bailout funds. Banks maintain credit-market conditions and changes in borrowers' credit scores necessitated the increases. This week, President Obama stood up and promised the public that he would personally be meeting with the heads of all of the major credit card companies to discuss the increased rate issue.

Sunday, on Meet The Press, White House economic advisor Larry Summers had this to say, “the President is going to be very focused, in the very near term, on a whole set of issues having to do with credit-card abuses. He said abuses included charging consumers "extraordinarily high rates that they wouldn't have paid if they knew what they were getting themselves into." Mr. Summers is meeting with credit company CEO’s today along with President Obama.

Today’s meeting comes as issuers have aggressively raised borrowers' credit card rates to as high as 30%. This week, the House Financial Services Committee approved legislation to crack down on issuers' ability to raise interest rates on existing credit card debt. This new bill hopes to clamp down on how credit card issuers do business. These proposals along with recent restrictions imposed by the Federal Reserve, mark the most significant efforts toward reforming predatory industry practices that have been in place for decades.

The situation is further frustrated because the credit card companies have been receiving TARP money. Consumers feel this money should be utilized on their behalf. Lower rates and easier access to credit are what the consumer requires. Unfortunately, the banks and card companies disagree on this point. Carol Kaplan of the American Bankers Association feels, as for the bailout money, the TARP funds “provide a foundation” for companies to bolster their balance sheets, and aren’t meant to go toward things like helping credit-card customers directly.

The consumer and big business are often on different sides of the table. It is a rare occasion that finds them seated side by side. Currently, the table is set and we eagerly await the outcome. President Obama and today’s discussion will go a long way towards settling these issues. The President and Larry Summers seem to be on the right side of the table, ours, so lets applaud the administration for being there at all, but reserve our judgment until after we see what they are serving- and who picks up the check.