Credit card companies next on Obama's to do list

If there's one thing you can say about President Obama, whether you like his policies or not, is that he's definitely keeping busy -- not surprising given the economy he inherited, the wars, the climate and so on. Next on his to-do list now is the credit card industry.

The president is "going to be very focused, in a very near term, on a whole set of issues having to do with credit card abuses, having to do with the way people have been deceived into paying extraordinarily high rates that they wouldn't have paid if they knew what they were getting themselves into," White House economic adviser Lawrence Summers said on NBC's "Meet the Press." Summers is scheduled to meet on Thursday at the White House with the heads of 14 credit card companies.

In the meantime, lawmakers have already begun advancing legislation to curb certain credit-card fees and other practices and require greater disclosure of terms. The Congress is considering a credit card "bill of rights" and last month the Senate approved Senate Bill 414 to overhaul credit card company practices, including requiring that "credit card statements be mailed at least 21 days before the bill is due and forbid card issuers from changing the terms of a contract as long as the cardholder remains current on payments."

Last December, new rules were finalized by the Federal Reserve but will take effect only in July 2010. The possible new legislation could come sooner, but of course banks oppose that, claiming it would restrain the availability of credit.

It's not surprising then that there has been much anger toward banks with big credit card operations charging high interest rates and fees. It is these same institutions getting government bailouts from U.S. taxpayers that have been raising their credit-card rates in recent weeks.

Now it would be interesting to see how the administration plans to address the issue. Although no specific actions have been announced, this may no doubt once again spark the argument regarding personal responsibility vs. questionable practices, as well as free market vs. government intervention. When Summers says that "We need to do things to stop the marketing of credit in ways that addict people to it," he takes out some personal responsibility out of the equation. At the same time, not all practices have been fair, leaving many with little recourse.

And then there is the structure of the industry, which is highly concentrated in the hands of a few big banks that may not have the same incentive to court consumers as they would have if the industry was more spread out. Similarly, in that case, the government may not have needed to intervene.

Banks would counter by saying they are the ones caught by the credit crunch, and that hiking fees is a matter of their survival, and by now they know talk of survival of banks only tends to help them. With credit card users defaulting on payments in record numbers in the fourth quarter, it only helps their cause. Still credit card borrowing has actually dropped 9.7 percent in 2008 and the money from penalty fees is no small change -- banks raked in $19 billion in penalties in 2008 -- so perhaps they're just trying the same marketing practices on the government as they do on consumers.

But perhaps all this is starting to take affect and hit a nerve at the big institutions: Bank of America (BAC) is now waiving some fees for customers who have lost their jobs.

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