Fed Chair Balks At Speed-Up Of Credit-Card Rules

Federal Reserve Chairman Ben Bernanke has told Congress that accelerating the effective date of credit card reform legislation would be good for consumers -- but that credit-card issuers need more time to adjust to the new rules.

Democrats on the House Financial Services Committee are pushing a bill to move up the effective date almost three months, to December 1. The law protects consumers from some of the worst credit card abuses, including sudden interest rate increases. While some of the provisions went into effect in August, others aren't scheduled to go live until February and August of next year.

"This bill is needed because too many credit card companies have been using the period since the bill's signing -- the period they pressed for, to prepare for the changes in their business -- in a way that betrays the confidence of their customers," Democratic Congresswoman Carolyn Maloney said in September. After President Barack Obama signed the law in May, some banks responded by raising interest rates and fees.

Bernanke, though, argued in a Tuesday letter to Rep. Spencer Bachus, the senior Republican on the committee, that while moving the effective date up to December "could benefit consumers by providing important protections earlier than scheduled (including protections against applying increased rates to existing credit card balances)," it could lead to problems for credit-card issuers. "Issuers must be afforded sufficient time for implementation to allow for an orderly transition and to avoid unintended consequences, compliance difficulties and potential liabilities."

Bernanke wrote that it would also force the Fed to implement the law "without providing the public with advance notice and the opportunity to comment," as the Fed wouldn't have time to solicit comments.

His protestations didn't impress reform advocates. "For 14 years these are the arguments that have been used to allow abuses of consumers to continue. I'm sorry, but how much more abuse can consumers take?" asked Center for Responsible Lending spokeswoman Kathleen Day. "We have to cut the banks' addiction to bad practices. It's too bad, but they should have thought about this beforehand."

"This is just another example of the Fed putting the interests of consumers behind those of the banks," Day said.

Read the letter HERE:

Bernanke Letter to Bachus -

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Comments

[newbridge]

Of course Bernanke put the banks ahead of consumers. Who do you think he works for and is owned by. Get rid of Bernanke, Geithner and Summers.

[BirdistheWord]

Consider the motives behind each side: Bernanke and the Fed have been tasked to loosen credit markets, and rushing legislation through to appease lobby groups like the Center for Responsible Lending will likely tighten credit further.

Motives behind the CRL gives some pause as well. CRL has affiliates like the Self Help Credit Union, which runs default rates on mortgages and loans 7 times higher than any credit union of its kind. If they can wrangle Congressional ire away from their affiliates, they’ve survived the public outrage driving these new rules, and done their job as a red herring.

[twotrees]

Regarding this issue. I just received this from a friend. Admittedly, I'm not that versed in market/econ lingo. But the tone of this article does not sound good. Perhaps those of you more savvy in this topic can break it down in layman's terms.

http://market-ticker.denninger.net/archives/1539-Possible-Credit-Dislocation-Be-Warned.html

[BillyMae]

I can't decide who are the greater rip-off artists: Bernanke and Geithner, the banks, or Wall Street. It's too late for many people; their only way to survive is to declare bankruptcy. Then creditors get nothing.

[max08]

Bernanke and the banks wanted a three-day rescue last September.

Now they want months and months to fix what they caused?

[sposton]

Bernanke ought to be the last chairman of the Fed. This thieving institution is the core cause of our economic downfall and it ought to be abolished once and for all.

[spinns17]

http://www.banksterusa.org/blog

[hellboundtrain]

Have a banker over for dinner tonight.

[Prakosh]

If the banks and credit card companies can change the interest rates and terms of your agreement within 30 days for any single customer. Then there is no reason whatsoever why they can't respond within thirty days to an imposed change of circumstances to them. It isn't even a question. They can and should be forced to do it. They only reason they want to dither is because they can make money in the meantime and of course the FED Chief is standing tall for their interests as the FED chief is supposed to do.

[hulagirrrl]

I thought so too, good point.

[LHB58]

What Bernanke is saying, in effect, is that banks need more time to adjust to new regulations so that when the regulations finally go into effect, they won't result in any changes whatsoever to lenders' behavior.

It's like passing a law to reduce the adverse impact of cocaine use among bankers by requiring Wall Street coke heads to limit their consumption to no more than the average of their weekly intake during the previous month. Then you give them six months to ramp up their tolerance to the point where their normal, regulated intake is the amount you intended to prevent them from consuming all along.

[deli lama]

bring back usury laws, limit lawful interest to 10%. void debts/contracts at higher rates.

pork 'em.

[mcmutter]

CAP the damm interest rates at 15%. STOP the bank thievery !!

[rbchilds]

I say cap it at 9% to 12% (depending on credit rating) + Inflation index.

[Prakosh]

That's more like it. I would give them a real rate of about 3-4 percent and that is it. Anything else is nothing but legalized robbery. Perhaps such a rate would be a nominal rate of 9-12 percent most of the time.

[budanatr]

NOOOOOOOOO­OOOOOOO!!!­!!!!!!!!
No more time. This should have been done yesterday!

[rbchilds]

Congress gave them too much time from the start, congress should have implemented the policy as soon as the bill was signed. All Congress did was allow the banks time to raise rates.

[drkazmd65]

One word,... NO.

The banks can 'adjust' their business models and projected revenues with a few keystrokes if they really want to.

Scr#w them.

[rinpochet]

So they can hike my interest rate IMMEDIATELY but they need more time to enforce measures that would protect the consumer?

Where is the concern about the consumer in all of this? It is all about protecting the criminal activity of the banks.

BURN THOSE CREDIT CARDS!