Bank critic praises credit card companies

By Jennifer Liberto, senior writer


WASHINGTON (CNNMoney.com) -- White House official Elizabeth Warren, best known for her outspoken criticism of the banking industry, praised that same group during a Tuesday conference on the one-year anniversary of the credit card laws.

A year after new credit card laws curbed interest rate hikes and forced new disclosures, consumers are paying fewer late fees and have a better understanding of what their cards cost, according to a federal study.

"The data we have assembled indicates that much of the industry has gone further than the law requires in curbing repricing and overlimit fees," Warren said. "Leaders in the industry deserve credit for moving in the right direction."

Warren is the administration's point person for setting up the Consumer Financial Protection Bureau, an independent agency funded by the Federal Reserve and charged with regulating credit cards and mortgages.

Warren also said that more needs to be done, especially when it comes to "clarifying price and risk and making it easier for consumers to make direct product comparisons."

That's where the consumer bureau will step in. But that bureau has faced a new round of scrutiny by House Republicans intent on slashing spending and shrinking government.

Last year, new laws took effect that made it more difficult for banks and credit card issuers to hike a cardholder's interest rates based on things like missing one payment or paying an unrelated bill late. Congress also required credit cards to disclose how long it would take to pay down credit cards making minimum payments.

A study conducted by the Office of Comptroller of the Currency found that after the new laws went into effect, only 2% of credit cards accounts were subject to rate hikes, down from 15% of accounts prior to the new laws.

Other findings in the study include:

-- The total amount of late fees collected dropped by more than half from $901 million in January 2010 to $427 million in November 2010.

-- The number of accounts hit with over-the-limit fees, for charges beyond the credit limit, "virtually disappeared," the report said, dropping from 12% of credit card accounts to 1%.

Banking industry representatives said they have few complaints. "It really gives people a good understanding of the cost of credit," said Scott Talbott, senior lobbyist for the Financial Services Roundtable, a bank lobbying group.

But the American Bankers Association maintains the law did put a crunch on the availability and cost of credit.

"Recent data indicates that the cost of credit and its availability have been negatively impacted by the Act, particularly for working class Americans, many of whom have been edged out of the marketplace or are facing higher upfront rates and tougher credit terms," said ABA senior vice president and chief attorney Kenneth J. Clayton.

The conference on credit cards comes on the heels of several days of new criticism lobbed against the consumer bureau by House Republicans. During a debate over cutting this year's budget, GOP lawmakers railed against the agency, arguing they should have more control over its operations and funding. To top of page

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