- New Congress Opens Hearings on Credit Card Fees
- February 2, 2007 | Author: Gerald L. Baldwin
- Law Firm: Frost Brown Todd LLC - Cincinnati Office
- On January 25, 2007, the Senate opened hearings on practices in the credit card industry. The Senate Banking Committee, under Chairman Christopher Dodd, held the first of several planned hearings to investigate what some witnesses described as "abusive lending practices" and "tricks and traps" which have become prevalent in the industry according to several consumer rights representatives. The Committee also heard from representatives from the banking industry, including Capital One Financial, Barclay US and J.P. Morgan Chase.
Consumer advocates described not only the growth in credit card availability and total debt in the past decade but also what they saw as unfair devices designed to squeeze unconscionable returns from those who can least afford the high interest and fees often associated with credit card debt. Those same witnesses also urged the Congress to remedy what they saw as confusing or unintelligible credit card disclosures currently in place under the Truth-In-Lending Act. In addition, consumer rights advocates testified that the changes to the Bankruptcy Code enacted in 2005 have created an unfair playing field in favor of the credit card companies.
On the industry side, witnesses lauded the current availability of credit to those to whom traditional avenues of credit, i.e., historic banking relationships and products, are not an alternative. They also described new simpler rules and disclosures adopted by some of their respective members voluntarily.
Some of the chief “abuses” cited by consumer advocates included universal default practices (a default on one card triggers imposition of default rates on all cards), double cycle billing, disappearing grace periods and high fees for payment by telephone.
Look for these hearings to continue in the new Congress and for possible legislation which will take aim at changing some of the practices cited as abuses.
For the complete hearing testimony, go to http://banking.senate.gov/index.cfm?Fuseaction=Hearings.Detail&HearingID=246