The Obama Administration today turned its attention toward abusive credit card practices.
After years of presidencies that were at best indifferent or at worst
supportive of the credit card industry abuses, to finally have the
White House give some attention to these issues is an incredibly
welcome development. Specifically, the Obama Administration has
indicated it will support H.R. 627, the Credit Cardholders' Bill of Rights Act of 2009.
Representatives Carolyn Maloney and Barney Frank have played a leadership
role in this legislation, as they have for years with consumer credit
issues, and they were able to get the bill through the House Financial
Services Committee. The full House is almost certain to pass the bill,
but it faces an uncertain future in the Senate.

The Credit Cardholders' Bill of Rights would end retroactive interest
rate hikes and hikes without notice, put an end to double cycle
billing, and limit fees and penalties. It is legislation that needs to
be adopted. Not surprisingly, the bill is facing tough opposition from
the financial services industry which is trotting out the usual
arguments about credit restrictions and price hikes. These canards,
although I know some will disagree with me about that characterization,
are used every time consumer lenders face legislation that might make
them play fairly. I'll let that debate play out in the comments, as it
undoubtedly will.

There is one particular industry argument, however, that strikes me as particularly disingenuous. The New York Times reports
that the industry is arguing the federal legislation is unnecessary
because it largely duplicates recently adopted Federal Reserve rules.
It is true that the legislation does have some overlap with the rules,
but that is still no reason for the legislation not to go forward.
First, the legislation is not identical with the Fed rules, meaning the legislation would fix some problems the Fed rules will not. Second, to
point out the overlap is to beg the question of which action is the
redundancy. Why aren't the Fed rules now redundant and beside the
point? Third, the Fed rules won't take effect until July 1, 2010, and
the legislation would take effect three months after adoption
(generally speaking). Fourth and perhaps most importantly, I suspect
the real reason the financial industry wants to keep the lawmaking at
the Federal Reserve level is that the industry has more influence there. Once
these new rules become enshrined in legislation, it will be much more
difficult for the financial industry to undo them, which is as it
should be.