Obama: Stamp out credit card 'abuses'
President meets with execs to press his case for consumer protections - a day after House panel OKs bill limiting increases on rates and fees.
WASHINGTON (CNNMoney.com) -- Ramping up his campaign to crack down on credit cards, President Obama met Thursday with more than a dozen executives of card-issuing companies to press his case for new consumer protections.
Obama, Treasury Secretary Tim Geithner and others met with executives of leading financial institutions like Visa (V, Fortune 500), American Express (AXP, Fortune 500), Mastercard (MA, Fortune 500), Capital One (COF, Fortune 500), and several big banks like Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500).
The White House meeting came a day after credit card legislation opposed by the financial services industry moved forward on Capitol Hill. The House Financial Services Committee voted 48-19 to approve a bill to clamp down on rates and fees; nine Republicans joined the panel's Democrats in voting for it.
The House bill would, among other things, ban "arbitrary" interest rate increases, prohibit excessive fees and order more disclosure. It could go to the full House for a vote as soon as next week.
Prior to his meeting, Obama outlined several principles that he urged Congress to pass, including a ban of unfair rate increases and penalties, clarity in terms and conditions, requiring all companies to make contract terms accessible and more oversight of the industry.
"Credit cards are an important convenience and a major source of unsecured debt for consumers," said Obama. "We want to preserve the credit card market, but we also want to do so in a way that eliminates abuses and problems that a lot of people are familiar with."
Obama advocated for a credit card holder bill of rights during last year's presidential campaign. But the administration had lately been mostly silent on the congressional proposals until last Sunday, when Obama economic adviser Larry Summers spoke publicly about the administration getting tough on credit card companies.
The House bill - and a similar one in the Senate - is a cornerstone of efforts by consumer groups and mostly congressional Democrats to rewrite rules governing lending practices by card companies, banks and others. The House bill, championed by Rep. Carolyn Maloney, D-N.Y., is similar to one passed by the House last year.
"This bill cracks down on some of the most outrageous abuses," Maloney said Wednesday. "My bill levels the playing field so consumers have more control over their credit."
In the Senate, which did not advance credit card proposals last year, a committee has passed a version of the House bill, with one Democrat voting against it.
The House bill mirrors tougher rules that the Federal Reserve passed last December but that don't go into effect until July 2010.
Two Senate Democrats, Charles Schumer, D-N.Y. and Senate Banking Chairman Christopher Dodd, D-Conn., on Thursday called on the Fed to freeze credit card interest rates tied to existing balances until the stricter rules take effect. Both senators said they have heard complaints from constituents who have seen their rates double or even triple almost overnight and without explanation.
"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," the senators wrote. "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."
The Fed changes would stop higher interest rates from being imposed when consumers are late paying unrelated bills. The changes also stop companies from averaging finance charges from two previous cycles, a practice that dings consumers who carry a balance and pay it off.
Several House Republicans said the pending Fed rule changes make congressional action unnecessary.
But Rep. Barney Frank, chairman of the House Financial Services panel, disagreed.
"What the Federal Reserve giveth, the Federal Reserve can taketh away," he said. Frank pointed out that the Fed could later undo the rules if Congress doesn't pass a law.
Meanwhile, industry lobbyists are fighting both the House and Senate bills for many reasons. But they especially don't like how the proposals would prevent card issuers from raising interest rates and fees based on risky behavior.