Remember being called into the principal’s office because you did something bad? That must have been how the credit card companies felt this week, as they made their way to the White House under President Obama’s orders.
Obama offers stern message
The credit card companies have grown pretty unpopular pretty quick among the American people (especially to those who have had their interest rates hiked, their limits cut, or weird fees added to their balances out of the blue). Many of these practices that seem so unfair will go away come July of 2010, when new Federal Reserve regulations kick in. But the people, the President, and many other politicians are saying that’s not fast enough. They want reform now.
It all boiled down to a half hour meeting yesterday in the Roosevelt Room. Obama gave the credit card execs a stern talking to, hoping to prompt voluntary changes (like clear, easy-to-read monthly statements and terms). It remains to be seen what, if any, concessions the creditors will make in response to the lecture.
Lobbyist pressure buys credit card companies more time
Unfortunately, it’s not looking like Congress is going to be able to force changes from the credit card industry anytime soon, either. A House bill and a Senate bill were both originally pushing for stronger reforms on a faster schedule than the July 2010 Fed’s regulations. But both bills have recently had their timelines extended due to increased pressure from the banks.
The House bill, which will go to a vote on the House floor next week, had its effective date pushed out to either 12 months after it passes or July 1, 2010 (whichever comes first). The Senate bill, originally intended to take effect immediately after passage, has now been re-written to allow for a 9-month lag time.
Ultimately, we may end up seeing very little true reform. Credit card companies are using this time before Federal and other government regulations kick in to hike interest rates and set other precedents that will counteract any changes they’ll be required to make next year. As Ed Mierzwinski of the U.S. Public Interest Research Group wrote: “Every day of delay is millions of dollars in unfair fee income. Every day of delay means more families cannot buy things to stimulate the economy (or save to buy things later), as they are forced to pay usurious credit card interest rates.”