Congress turns from bank bailouts to helping consumers

The nation’s deep economic slump is giving new impetus to moves on Capitol Hill to help consumers weather the crisis.

Targets include credit card companies that raise fees retroactively, payday loans that rack up annual interest rates as high as 391 percent, and predatory mortgage lenders that set millions of families on a road to foreclosure.

To date, much of the policy focus in Washington has been the rescue of the embattled financial services sector. The next marker will be the release of stress tests for the nation’s 19 largest banks, expected Thursday.

But with public approval of banks and bailouts in the tank, Congress wants also to build up a record helping Main Street, even if it means taking on issues long opposed by the financial services industry.

“Ninety percent of the American people want us to do something about credit cards. We’re going to take on the banks,” said Senate majority leader Harry Reid, in a briefing on Thursday. “We’re focusing on Main Street, not Wall Street.”

Credit card holders want action

Last week, the House passed by a vote of 357-70 a Credit Cardholders’ Bill of Rights. The bill accelerates the timing of new rules by the Federal Reserve, issued in December after 66,000 consumers (a record) sent in comments backing the changes.

“A contract with the credit card companies is probably the only one in the world where [companies] can change the terms, any time, any reason. And this bill will ban some of the most outrageous abuses, such as raising interest rates retroactively on existing balances,” said Rep. Carolyn Maloney (D) of New York, who sponsored the bill.

The proposed law requires credit card companies to provide 45 days notice in advance of raising interest rates and to disclose the impact of the change on credit card balances. This provision is effective 90 days after the bill is signed into law.

Other changes include more time to pay down credit card balances. The House bill requires statements to be mailed at least 21 days before due date, up from 14 days. It prohibits unilateral changes to contracts and it sets conditions for retroactive interest-rate increases. It requires that credit card providers keep low-interest teaser offers in place at least six months before hiking rates. It bans the practice of changing due dates for payments.

Recession adds to urgency

“Many families are turning to their credit cards because they’ve lost their jobs. Therefore, it is very important that we enact this to stop unfair and deceptive practices and give tools to consumers during these troubled times to better manage their finances,” Ms. Maloney said in a briefing after the vote last week.

Consumer groups hailed the bill as ending a long drought in Washington for consumer protection. A similar bill passed the House last year, but was never taken up by the Senate.

“Until Maloney’s bill passed the House last year, no bill -- no bill! -- opposed by the credit card companies even had a vote in a congressional committee, let alone won,” said Ed Mierzwinski, consumer program director for U.S. PIRG, the federation of state Public Interest Research Groups in Washington.

On April 23, President Obama met with credit card executives in the White House and called for their cooperation in clarifying and reforming the process. Many are also recipients of taxpayer help through the Troubled Asset Relief Program. These include: American Express, Bank of America, Capital One, Citigroup, and JPMorgan Chase.

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