Congress nips at heels of credit-card companies

Both the Senate and the House have held hearings this year on what consumer advocates regard as greedy practices by credit-card firms.

By David R. Francis | Columnist

from the June 4, 2007 edition

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Historically, charging interest was a perilous business, especially at times when anti-Semitism was rampant. For instance, in 1290, all Jews were expelled from England, with "usury" cited as the official reason – charging interest was considered blasphemous.

Almost all their property went to the Crown.

Today, credit-card companies often charge interest rates to consumers that many would regard as usurious, that is, excessively high. Fortunately, the heads of these firms no longer risk banishment for what is a legal business, and one highly useful to most of their customers.

But Congress is on their case. Both the Senate and the House have held hearings this year on what consumer advocates regard as greedy practices by credit-card firms.

Last month, Sens. Carl Levin (D) of Michigan and Claire McCaskill (D) of Missouri introduced a bill "to put an end to unfair and abusive credit practices that outrage so many American families."

The Senate bill proposes 10 changes in favor of consumers. It would, for instance, prohibit interest charges on any portion of debt a card holder paid on time during a grace period, and interest on fees, such as late fees.

Senator Levin acknowledged the utility of credit cards to family life today. People use them to buy groceries, rent a car, shop on the Internet, pay college tuition, and even pay taxes, he noted. In 2005, the average American family had five credit cards. These households used nearly 700 million cards to buy goods and services worth $1.8 trillion.

The senators' bill has been sent to the Senate Banking Committee for consideration. That committee is chaired by Sen. Chris­topher Dodd (D) of Connecticut, who held hearings himself in January on credit-card practices. He warned banks and other credit-card companies to mend their ways, in what press reports saw as a move to raise his public profile and boost his candidacy for the Democratic Party's presidential nomination.

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