On a day when President Barack Obama was to give a scheduled scolding to the executives of credit card issuing institutions, a pair of prominent Democratic senators asked federal regulators to impose an “emergency freeze” on credit card rate increases on existing balances.
Sen. Chris Dodd (D-Conn.) and Sen. Charles Schumer (D-N.Y.) wrote their letter to Federal Reserve Chairman Ben Bernanke, Office of Thrift Supervision Acting Director John Bowman and National Credit Union Administration Chairman Michael Fryzel. The senators asked that they use emergency authority under the “good cause” exception to the Administrative Procedures Act to impose the freeze.
“Over the past year, the Federal Reserve has cited the financial crisis as one of the reasons for acting quickly to implement new lending facilities and programs to protect financial institutions,” they wrote. “It is long past time for the regulatory agencies to act with the same sense of urgency to protect consumers from the behavior of those same financial companies.”
Federal regulators in December 2008 imposed a sweeping set of new rules on card issuers, but they don’t go into effect until July 2010. Dodd, chairman of the Senate Banking Committee, and Schumer are both sponsors of a bill that would codify the regulations into law, and add extra consumer protections,
“As Congress works to pass this legislation, and before your rules become effective, issuers continue to operate using unfair and deceptive acts and practices,” they wrote. “Credit card providers have been aggressively raising rates on consumers now to avoid the ramifications of this rule when it goes into effect next year.”
“Consumers describe situations to our offices in which the interest rates on their accounts have doubled or tripled overnight, without any misconduct on their part. This kind of practice clearly violates the spirit and intention of the rules, even if the delayed implementation date has the effect of making such behavior legal.”
Their letter comes as card issuers felt pressure from another branch of government — the executive. The president and White House staff held closed-door meetings today to discuss credit card industry practices with executives from Bank of America, Bank of America, Citi, Chase, American Express, Wells Fargo, Capital One, Visa and MasterCard.
After the meeting, the president promised to provide “strong and reliable” protections for credit card users.
The bankers have received billions in bailout money, but have continued to raise interest rates and cut credit limits on millions of consumers, sparking an outcry from consumers and gaining the attention of politicians.