The nation’s biggest banks just don’t get it. After spending billions of dollars bailing out the nation’s financial sector, including many of the nation’s largest banks, President Obama has requested Congress send him legislation to limit the sudden rate hikes and hidden fees banks are piling on credit card users. Have they no shame?
“Americans know that they have a responsibility to live within their means and pay what they owe,” Obama said in his weekly radio and Internet address this past Saturday. “But they also have a right to not get ripped off by the sudden rate hikes, unfair penalties and hidden fees that have become all too common.”
“You shouldn’t have to fear that any new credit card is going to come with strings attached, nor should you need a magnifying glass and a reference book to read a credit card application. And the abuses in our credit card industry have only multiplied in the midst of this recession, when Americans can least afford to bear an extra burden,” the president said.
In legislation known as the Credit Card Holders Bill of Rights, which has passed the House and awaits action in the Senate (perhaps later this week), the bill would ban double-cycle billing and retroactive rate increases and would prevent companies from giving credit cards to anyone under 18. All are reasonable actions: the first two to eliminate outright thievery by banks, and the third eliminates unwarranted temptation.
Market purists will respond that teenagers and the parents that allow them to have credit cards should be responsible enough to spend within their means, but common sense suggests that providing young teens with such temptation is irresponsible and a market-driven ploy that preys on the weakness of others while pocketing huge profits. That bankers even go there further sullies an already damaged reputation.
From our perspective, the legislation doesn’t go far enough. Credit card rates should not be allowed to hit the 18-40 percent rates now being charged in some circumstances, but capped at 15 percent — the same rates that are capped for credit unions which, according to congressional testimony, provides ample profit. Moreover, we’d suggest that if the user gets behind on payments by an unreasonable amount (say three months) and can’t pay immediately, the card could be immobilized until the debt is retired, then reinstated — a measure that would protect the banks as well as the card user.
We could also imagine a system in which credit cards companies had to crosscheck potential customers to insure that debts were not owed on other credit cards before issuing a new card. And in our wildest dreams — perhaps in the role of benevolent dictator — we would limit the number of mail solicitations to two renewals a year, and one mailed solicitation for a new card per individual per year. Just think how many trees America would save, and the amount of energy not consumed by all that wasted use of resources!
In his more practical message, President Obama limited his outrage to the “abuse that goes unpunished” by the credit card companies and stressed the need “to strengthen monitoring, enforcement and penalties for credit card companies that take advantage of ordinary Americans.”
The president hopes to have the legislation ready to sign by Memorial Day, and it couldn’t come soon enough. As the president said, “There is no time for delay. We need a durable and successful flow of credit in our economy, but we can’t tolerate profits that depend upon misleading working families. Those days are over.”
What also has changed are the days when such shenanigans were condoned. What a difference an election can make.
Angelo S. Lynn