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.

from the June 4, 2007 edition

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The US Federal Reserve got into the act last month, proposing more relevant and readable disclosure of credit card terms.

Many Americans are forced by joblessness, medical bills, or other problems to resort to what Tamara Draut of Demos, a New York think tank, calls "a plastic safety net – in the absence of a public safety net."

Emergencies of all sorts are one reason the average credit-card debt for households with at least one credit card is more than $9,000. That's huge, compared with the median household income of $46,000.

A single woman we'll call Margaret is an example of a credit-card user who would benefit from reform. (She asked that her real name not be used to protect her financial privacy.)

Margaret was jobless for about nine months last year. Her slim unemployment insurance payments ran out after six months. In paying rent and other bills, Margaret piled up thousands of dollars of debt on four credit cards from Citibank and Bank of America.

Today she has a good job. But because of late payments, her credit rating has slid badly. She pays between 18 and 32 percent interest on outstanding balances, with the total monthly interest bill exceeding $900. And she's slapped with a $36 late charge if she hasn't managed to make a payment on time. "Fees are enormous," Margaret laments.

At this time, she intends to consolidate her debts through Money Management International, a nonprofit organization that should be able to help her reduce interest charges and avoid excessive fees.

MMI, partly financed by credit-card companies, helped 170,000 debtors last year.

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