THE PERILS OF PLASTIC
 

U.S. Sen. Christopher Dodd (D-CT) held a State Capitol news conference last week to talk about his push to reform the credit card industry in America. Dodd, chair of the Senate Banking Committee, calls his reform plan "The C.A.R.D Act." That stands for credit card accountability, responsibility and disclosure.

While conceding that credit cards provide financial convenience and other benefits for consumers, Dodd said the credit card industry has been allowed to use "confusing, misleading, and in some cases predatory practices" that too often have become "standard operating procedure" for many card issuers.
Due to the industry's political clout, Dodd said trying to get even minor reforms through Congress has been like "climbing a mountain."

Days after Dodd introduced his legislation in Washington, the Federal Reserve proposed its own set of rules to cure credit card abuses. Dodd had measured praise for that move saying it's great that the Fed is finally "doing something" about the problem. "The fact they've done anything at all is welcome news." The Senator will continue to push his own package of reforms.

Some of the changes proposed by Dodd include banning so-called "any time, any reason" hikes in interest rates for card members in good standing for reasons unrelated to their card use, prohibiting card companies from setting early morning deadlines for credit card payments, and preventing card issuers from changing the terms of a credit card contract for the length of the contract.

The Senator also wants credit card companies reined in when it comes to pitching their products to young people. He would require credit card issuers soliciting persons under age 21 to use an application form that requires the signature of a parent or guardian who agrees to take responsibility for any credit card debt, while demanding proof from the young person that he or she has independent means of repaying any credit card debt.

Three decades ago, just 16% of Americans used a credit card, now more than 75% have them. Dodd said the average is four credit cards per household, and for those users with a balance due, consumer debt is pegged at nearly $10,000 per household.

"This is a growing problem," said Dodd. "The credit card industry has saddled consumers in the last 10 years with $17 billion dollars worth of additional fees, late charges and the like," said the Senator.

Of course, all this reform talk from Dodd and the Fed is not lost on interests who issue credit cards and profit from them. Ken Clayton, an executive for the American Bankers Association, called the proposed changes "aggressive regulatory intervention in the marketplace that will result in higher prices and less consumer credit." The ABA's president, Edward Yingling claimed that "if card companies cannot fully reflect risk, then millions of consumers with good credit histories will end up with higher rates."

That kind of warning likely will not deter Dodd. He has criticized credit card companies for failing to step up and reform deceptive practices on their own. He said rising energy and food prices and skyrocketing health care costs are making it tougher for families to pay their credit card bills.

"Americans do not deserve to be pushed down the economic ladder by credit card companies," said Dodd. "It's wrong, it's unfair, and it must end."

Posted 5/5/08

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