Credit Cards – Review & Reform
The banking industry has been fighting hard to limit the changes by watering down the legislation. In President Obama's Weekly Address, he urged Congress to pass the legislation so he can sign the bill into law by Memorial Day.
A few facts about credit cards
Consumer Credit Card Debt has increased this past decade. Credit card debt has increased by 25 percent in the past 10 years, and reached $963B in January 2009. (Federal Reserve 2009)
78 percent of U.S. families have a credit card, and 44 percent of families carried a balance on their credit card. (Nielsen 2008, Federal Reserve 2008)
U.S. families have been carrying more and more credit card debt. The average amount of credit card debt among U.S. families with a balance was $7,300 in 2007 . (Federal Reserve, 2008)
Delinquency rates have increased by more than a third since the end of 2006. The number of accounts more than 30 days late has increased from 3.9% in the fourth quarter of 2006, to 5.6% in the fourth quarter of 2008. (FFIEC, 2008)
Penalty fees paid by consumers on credit cards are around $15 billion annually, an estimated 10 percent of total credit card industry revenues. (Calculation based on GAO 2006 and Federal Reserve 2009)
One-fifth of credit card holders carrying credit card debt pay an interest rate above 20 percent (GAO 2006).
President Obama's Weekly Address on credit card reform
"Nowhere is this more apparent than in our credit card industry. Americans know that they have a responsibility to live within their means and pay what they owe. But they also have a right to not get ripped off by the sudden rate hikes, unfair penalties, and hidden fees that have become all-too common in our credit card industry. You shouldn’t have to fear that any new credit card is going to come with strings attached, nor should you need a magnifying glass and a reference book to read a credit card application. And the abuses in our credit card industry have only multiplied in the midst of this recession, when Americans can least afford to bear an extra burden.
It is past time for rules that are fair and transparent. That is why I have called for a set of new principles to reform our credit card industry. Instead of an "anything goes" approach, we need strong and reliable protections for consumers. Instead of fine print that hides the truth, we need credit card forms and statements that have plain language in plain sight, and we need to give people the tools they need to find a credit card that meets their needs. And instead of abuse that goes unpunished, we need to strengthen monitoring, enforcement, and penalties for credit card companies that take advantage of ordinary Americans.
The House has taken important steps toward putting these principles into law, and the Senate is poised to do the same next week. Now, I’m calling on Congress to take final action to pass a credit card reform bill that protects American consumers so that I can sign it into law by Memorial Day. There is no time for delay. We need a durable and successful flow of credit in our economy, but we can’t tolerate profits that depend upon misleading working families. Those days are over.
This economic crisis has reminded us that we are all in this together. We can’t prosper by putting off hard choices, or by protecting the profits of the few at the expense of the middle class. We are making steady progress toward recovery, but we must ensure that the legacy of this recession is an American economy that rewards work and innovation; that is guided by fairness and responsibility; and that grows steadily into the future."