Swiped! Did The Credit Card Industry Just Hijack Credit Card Reform Legislation?

The prevailing wisdom in this week's press reports about credit card reform legislation now being debated in the Senate is that Senator Dodd's version is stronger than the Credit Cardholders' Bill of Rights, which passed the House easily last month. The New York Times' Carl Hulse concluded:

[The Senate bill] goes farther than a measure already easily passed by the House in imposing an array of new restrictions on credit card companies.

Politico's Victoria McGrane was slightly more accurate:

The compromise [between Banking Committee mates Senator Dodd and Republican Senator Richard Shelby] softened some provisions in Dodd's original bill -- which came out of committee without a single Republican vote -- but still would give the industry a stronger dose of medicine than the bill passed by the House last month.

As far as they go, these reports are not inaccurate, but they tell far from the whole story. Indeed, the current version of the Dodd bill is significantly weaker than the version that was passed by the Banking Committee. Indeed, the Dodd-Shelby compromise looks very, very similar to Rep. Maloney's bill of rights. The real story is the direction in which compromising with Senator Shelby pulled Senator Dodd. That is, in the direction of the credit card companies.

The Credit Card Accountability, Responsibility, and Disclosure Act, though an important milestone in consumer protections, exhibits the signs of the credit card industry's powerful influence. Unlike the previous version, the bill likely to be passed by the Senate does not explicitly prohibit universal default, the practice whereby a credit card company uses information unrelated to a consumer's credit card as the basis for increasing the interest rate. Instead, card companies are left to decide for themselves when improvements in a cardholder's credit warrant a rate reduction. The previous version, like the House version, limit the number of over-the-limit fees - fees applied when a cardholder charges more than their card limit - that card companies can apply. This version does not.

Instead of outright prohibition of abusively high fees, the Credit Card Accountability, Responsibility, and Disclosure Act requires that fees be reasonable and proportional; the card industry, with easy access to political power, will determine what "reasonable and proportional" mean. Though the Act improves oversight of the credit card industry, the previous version required the collection of comprehensive and detailed information about an industry whose practices are at best opaque and at worst purposefully deceptive.

While compromise is necessary to the legislative process, in this case compromise seems to have been largely one-sided.

Comments

[wtf idnk izzle]

I agree with the blogger that compromise has gutted remedy from the bill.

I signed up at 8.9%. They now charge me 25.9%. Retroactively, to my balance. They also have colluded so that this is the practice across the board. I can't shop around for a more honest deal.

(1) Real reform would have made it so that all changes in rate would apply only to future purchases.

(2) People are using credit cards for necessities. Because of this Sanders usury regulations are more than in order, they are a measure that should be taken in response to the recession if for no other reason. There should be a cap instead of a gouge.

But back to the blogger's point. The democrats do not know how to negotiate. They start with the reasonable proposition and then let it be gutted by compromise. Democrats need to start the bargaining with usury = 10% and cite the bible and theologians, as Arianna does elsewhere on this site. Compromise with the Republicans who aren't ashamed to be in the bankers pockets would mean moving 10% to 15%, not eliminating the provision.

Politically, Democrats need to mount a charge that the Republicans are bought and sold, that their opposition to change is entrenched interest. We need to cut off lobbyist financing of political candidates. Republicans = protection for top 1%. Trickle down is the lie that sells it.

I'm still waiting for change. Signs of change. Something. I see through the smoke.

[KillTheMessenger]

You don't have to use credit cards if you don't want them. Just don't apply for any.

[mbaty]

That's ok. Once the credit card companies fail we can do something more effective and more equitable.

[TJCole]

We are a government of the bankers, by the bankers, and for the bankers ...not the people..!

[Spud777]

This is all the typical "smoke and mirrors" that politicans foist on average Americans as they suck up campaign contributions from corporations and then lie that this does not "affect" their votes. They really think the average American is stupid, and sometimes I have to agree with that assessment when I look at the clowns in Congress who are constantly reelected.

[Veri]

Ahem, the fact that these abuses have gone on for so long demonstrates the fact that most Americans are stupid. That, and Americans keep electing the same politicians (or some that are not too different in ideology) over and over again to their economic detriment. This also demonstrates the stupidity of Americans.

Not all Americans, however. The truth is, Americans will be poorer and learn to accept it. After all, two breadcrumbs are better than no bread crumbs.

[Rule Of Law]

the Credit Card Accountability, Responsibility, and Disclosure Act...

Where do they keep coming up with these down the rabbit hole names for these things? Like we can't see what's up?

[americaforme]

We need good old fashion tar and feathers, for the gutting banks, all caught up in fleecing the sheeple. Look at all the elected officials jumping on the band wagon, to torture the main street credit card holders. No bailouts for the average guy. I dont care how many fancy words folks use, its a plain old crime this usury. If the banks didn't want all this debt they shouldn't have mailed those expanded credit lines to poor folks, like seniors, and the young. If you cant pay your heating bill and a card comes in the mail, Hello, go figure! The energy has a strangle hold on the elderly. Keeping warm and food in the belly are basics, people. Washington needs a crash course in poverty, and mabey, just mabey, they will have a little compassion on the little guy who voted for them.

[Kassandra]

"requires that fees be reasonable and proportional; the card industry, with easy access to political power, will determine what "reasonable and proportional" mean."

In other words "Please be good, PLEASE!" Just like Obama with the insurance companies and the "Healthcare bill".
Obviously, the corporations have taken over the government and we are now a corporate dictatorship.
I take back all my previous comments that let these "people" off the hook.

Get ready to starve.

[swisskabab]

Well said Kassandra.

Every Wall-St./B­ank/Credit Card reform effort by the Obama administration has ended up with ... "wall st. knows best and they will SELF regulate, SELF correct, SELF assess" ... "No No NO we cant have rules for these smart people, cause if we do the economy will die" .

I regret supporting and contributing to Obama's presidency.