Chuck Schumer Optimistic On Fate Of Credit Card Reform

For Chuck Schumer, credit card legislation now in the Senate passes the O'Halloran's Pub test. The effort to reform the bankruptcy code to stave off foreclosure last week didn't.

"Bankruptcy reform, important as it was, was sort of esoteric. If you went into O'Halloran's Pub, the fellas aren't saying to you, 'What's going on with bankruptcy reform?'" says Schumer in his best guy-on-a-bar-stool voice. "But they might say, 'What are you doing about my credit cards?' The average person feels the second much more than the first, even though both are important."

It's that distinction that has congressional observers much more confident that credit card reform will move through the Senate this week and land on President Obama's budget. Negotiations are ongoing, but the crux of the legislation moves the industry from a disclosure frame -- in other words, they could do pretty much whatever they wanted as long as they disclosed it in fine print somewhere -- to a situation where certain credit company tactics become illegal, such as retroactively raising interest rates on balances.

Schumer embodies the shifting politics. Some of that fine print on your statement is known as a Schumer Box, named for the New York Democrat who agreed with credit card firms that disclosure alone was sufficient. He no longer thinks so.

"I think that lots of members from all parts of the country and different parties feel pressure to do something. So I think it bodes pretty well to try to get something significant done," he says.

Is he fully on board?

"Oh yes," Schumer says.

It's still taking some time, however, for more conservative Democrats to find their footing on this new political terrain -- but they're trying.

"I think it's important that some of the practices that have been going on that everybody knows about, where balances are figured, and stuff like that, need to be addressed," says Sen. Ben Nelson (D-Neb.), who represents a state with credit card interests and routinely works to pull Obama's agenda toward the financial industry's position. He voted with the banks Thursday to oppose bankruptcy reform, one of 12 Democrats to do so.

"If there's sufficient votes to change it, that makes sense. I do not think that that's going to create the loss of a lot of jobs [in the credit card industry in Nebraska], so modernizing it in today's world so that balances are more fairly determined probably makes sense. It's what else is in the bill that's gonna matter to me," says Nelson, who is not directly involved in negotiations between banking committee chair Chris Dodd (D-Conn.) and ranking Republican Richard Shelby of Alabama.

Sen. Mark Warner (D-Va.) cast a politically courageous vote against the banks last week, but is still on the fence this time around. "I think the overall goal is appropriate, but I've got some concerns on the current bill," he says, declining to outline them specifically.

Ryan Grim is the author of the forthcoming book This Is Your Country On Drugs: The Secret History of Getting High in America

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Comments

[Kassandra]

01:38 PM on 05/05/2009

Bull cr*p! People are just as or more worried about being thrown out of their homes as they are about usurious credit card companies. Might as well go to a wise guy on the corner as deal with ANY of these "people".

American politicians have totally lost their way.

[nogimmicks]

12:56 PM on 05/05/2009

Chuck's long winded speech today at Bernanke's hearings was pathetic. He pretended to be concerned about credit card holders but did not really insist on anything. Chuck should stick to what he does best: defend war and torture.

[senorlou]

11:58 AM on 05/05/2009

A quick poor me story:

My interest rate went from 11.99% up to 17.99% JUST LAST MONTH. Started three years ago back at 9.99%. People are just getting totally screwed right now. Oh yeah, $45 service charge every month on top of the interest. I owed less than $5K.

[Spesabsquemetu]

10:36 AM on 05/05/2009

*correction

On an additional note, I find it troubling for any senator to suggest that the issue of foreclosure protections for the MIDDLE CLASS - (which is truly what that foreclosure amendment was for because the wealthy already have that protection) - is an ESOTERIC matter.

"Bankruptcy reform, important as it was, was sort of esoteric" (C. Schumer)

ESOTERIC?
Perhaps the senator mis-spoke and meant to say that the failure by the senate to PROVIDE PROTECTIONS FOR THE MIDDLE CLASS TO BE SHELTERED FROM LOSING THE ONLY HOME THEY HAVE - (as yacht owners, and people with 2+homes are being provided with) was ESOTERIC.

Esoteric was the RESTRICTION of FORECLOSURE PROTECTIONS for middle class America, that were granted to the wealthy by the senate. Esoteric was the denial of UNIFORMITY OF LAW that has already been provided to all wealthy people with yachts and 2+homes, and INTENDED FOR THEM and NOT the MIDDLE CLASS, and therefore only UNDERSTOOD BY THEM- and felt by - A RESTRICTED FEW (that being, the very wealthy, who really know how much a good deal - adjudicated by a judge that affords them a renegotiation of their mortgages that provides DEBT RELIEF to the wealthy and PROTECTIONS OF THEIR WEALTH) - can really make in their lives, by providing tremendous protections for and benefits in their FINANCIAL SECURITY.

[Spesabsquemetu]

10:31 AM on 05/05/2009

On an additional note, I find it troubling for any senator to suggest that the issue of foreclosure protections for the MIDDLE CLASS - (which is truly what that foreclosure amendment was for because the wealthy already have that protection) - is an ESOTERIC matter.

"Bankruptcy reform, important as it was, was sort of esoteric" (C. Schumer)

ESOTERIC?
Perhaps the senator mis-spoke and meant to say that the failure by the senate to PROVIDE PROTECTIONS FOR THE MIDDLE CLASS TO BE SHELTERED FROM LOSING THE ONLY HOME THEY HAVE - (as yacht owners, and people with 2+homes are being provided with) was ESOTERIC.

Esoteric was the RESTRICTION of FORECLOSURE PROTECTIONS for middle class America, that were granted to the wealthy. It was a denial of UNIFORMITY OF LAW that has already been provided to all wealthy people with yachts and 2+homes, and INTENDED FOR THEM and NOT the MIDDLE CLASS, and therefore only UNDERSTOOD BY - (and felt by) - A RESTRICTED FEW (that being, the very wealthy, who really know how much a good deal adjudicated by a judge that affords them a renegotiation of their mortgages that provides DEBT RELIEF to the wealthy and PROTECTIONS OF THEIR WEALTH) - can really make a tremendous difference in their FINANCIAL SECURITY.

What was ESOTERIC was the senate's response to middle class America: NO HOME FOR YOU.
Yes. VERY difficult to understand. ESOTERIC.

[TJCole]

10:26 AM on 05/05/2009

Stop obfuscating Senator; We need and we demand action in regard to these millions of coming needless foreclosures as well as an end to the usurious predatory credit card rate abuses that are strangling and constricting our economy...and gouging the American people..!

[WinterParkMom]

10:24 AM on 05/05/2009

When you need to have a credit card in order to create credit history, cards are a necessity. Card companies, ie banks need to have regulations in place in order for the consumer not to be gouged.

1- Cap interest rate increases at maximum of 5% per calendar year.
2- 45 day activation period for any rate increase in order for the consumer to find another card and transfer balance
3 - Credit card companies CANNOT access card holders credit reports without written consent so they cannot profile and target certain holders for rate increases.
4 - Minimum 10 day grace period for payment without late fee assessment
5 - THESE REGULATIONS SHOULD BE ENACTED IMMEDIATELY, NOT IN 1 YEAR. A 1 year wait period would give these guys the upper hand still, they'll raise everyone's rates to 40% in that time and this legislation would not be effective. Kind of like closing the barn door after the horse got out.

It is time for our elected representatives to represent US the American taxpayer who pays their salaries, who pays for their health insurance and ultimately pays for their darn credit card bills.

[Spesabsquemetu]

11:40 AM on 05/05/2009

You have some good suggestions, but I fail to see why interest rate increases should have a 5% per calendar cap when most people don't get 5% raises per year. Caps need to be LOWER, in my opinion. A LOT LOWER.

NEEDS VS. WANTS:

Where is the senate in addressing consumers use of credit cards for NEEDS?

1. With Americans (those still lucky enough to have a job) earning a mere 3% increase per calendar year on salary, why are credit card companies allowed to charge outrageous interest rates that are not on par with salary increases and the economic crises we are facing - particularly given the BAILOUTS to the banking industry?

2. NO CAP INTEREST RATE INCREASES OF ANY KIND ON NEEDS: FOOD, CLOTHING, COSTS FOR SHELTER. Set FIXED interest rates of 4% for food, clothing, shelter costs.
Protect consumers by creating provisions for REDUCED INTEREST RATES for food, clothing, shelter paid for by credit. (that would save families big bucks, more meaningful, than the $16. added to their salaries thru tax cuts. For example: food bill - family of 4 anywhere between 140 - 200 dollars, with credit card INTEREST LIMITS of 4% vs. 12% or more being charged, would reap greater impact for savings for Americans and provide MEANINGFUL relief.)

3. INCREASE LUXURY INTEREST RATES: those big ticket items that qualify as being a WANT , a luxury...and set interest caps on THESE ITEMS.

Perhaps more could be done along these lines, in conjunction with your

[WinterParkMom]

01:56 PM on 05/05/2009

Good thoughts....I can live with those. Now who's going to listen to us? I'll tell you, the folks that represent Florida where I live don't even respond to email much less a handwritten letter. Dems or Reps.

[Spesabsquemetu]

10:20 AM on 05/05/2009

I may be missing something here, but what is being proposed as credit card reform, does not appear to be readily felt or available - so how is that aiding in relief NOW? Furthermore, this goes to the root of why Dr. Krugman was suggesting that the financial "reforms" being proposed by the Geithner team, will not address the overall causes for the financial crises we are facing, nor the depths to which it is being felt on main street ( if I understand Dr. Krugman correctly.)

But this is disconcerting , and disappointing coming from a senator of the caliber of C. Schumer, who has always been an advocate for the American people:

"Bankruptcy reform, important as it was, was sort of esoteric. If you went into O'Halloran's Pub, the fellas aren't saying to you, 'What's going on with bankruptcy reform?'" says Schumer

Sen Schumer: WHY do you suppose you are NOT meeting the HOMELESS, the FORECLOSED UPON in O'Halloran's Pub?

Just because you do not hear their cries for help and AID, does not mean they do not exist.
LISTEN, LOOK, and SERVE THEM.
That is what you were entrusted to do.
Your not hearing their voices is perhaps a function of your not being WHERE THEY ARE, sir.

[sunflour]

10:30 AM on 05/05/2009

Right on..those of us in bankruptcy are not at the local watering hole, we are holed up in our homes, trying to hold onto them and our sanity. What an arrogant oaf like thing to say.

[Stilts9]

10:06 AM on 05/05/2009

Schumer would trample his grandma to get in front of a camera.

[MissingAmerica]

09:42 AM on 05/05/2009

My kids chose to sell their house and live in an RV to be able to travel to wherever the work may be. The house took $20,000 work to make it attractive, so this had to be put on a credit card. The house squeaked by without selling for less than paid. They were making the payments when the interest on their BofA jumped from 12.4 to 25.9. They were able to pay off all but $7,000 to close that and transferred that $7,000 to their WaMu card (now Chase). Fortunately, they locked it in at 4% just before the interest went to 12%. About two weeks later, the interest was again raised, this time to 40.56%! Needless to say, they are putting nothing new on that card. Everything is going into paying down that $7,000 so they can close the card.

Credit cards are no longer viable, which means we must pay cash for everything, and that is a hardship. No matter how you look at it, it is the people who are being squeezed, not the companies. I hope this legislation passes and that it is fair, unlike the ridiculous legislation regard payday lenders. We need to overhaul our financial system to a point where there is no room to service greed.

[BarryChamplain]

10:44 AM on 05/05/2009

"Credit cards are no longer viable, which means we must pay cash for everything, and that is a hardship."


Stipulated, BUT... look at the extrapolation of this:

Everyone with credit card debt takes your cue, and pays cash from now on. The debt remaining on their credit cards, effectively becomes a (too-) high interest loan, which debtors pay off before they cease to use the product altogether.

This benefits the credit card companies in the short run, to the degree that the profits they normally make on interest rates have just gone through the ceiling. Looks great on paper. However, with no further credit card use, that profit REMAINS short-run.

And that is the exact problem with literally everything about corporate America: it's all about the short run. By the time the company goes down the crapper, the Masters of the Universe who devised these systems are out, and they have their bonuses. They could care less.

[Kassandra]

01:39 PM on 05/05/2009

That is an awful story. I'm very sorry to hear your kids were screwed this way