Obama to challenge credit card titans
Posted: 23 April 2009 1500 hrs

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WASHINGTON: President Barack Obama will Thursday tell US credit card industry chieftains he will push for more regulation to shield consumers from unfair fees, punitive interest rates and predatory lending.

Obama was expected to meet heads of firms including American Express, Visa and MasterCard at the White House as he and Democrats in Congress craft new guidelines which are causing concern in the under-fire sector.

"The president believes new rules of the road for the credit card industry are needed," said Obama's special advisor Valerie Jarrett on Wednesday.

"He looks forward to having an open and productive conversation tomorrow with the representatives of the credit card industry about the impact of the current crisis on consumers."

Obama's meeting follows a previous encounter with titans of the US banking industry, which reportedly included sharp discussion on the causes of the crisis, its impact on ordinary Americans and the best way to promote recovery.

The president's spokesman Robert Gibbs said Obama wanted to ensure if "somebody gets a credit card, they don't find that their rates go up exponentially on a certain day based on fine print in a contract that no one is ever going to read.

"Or that we find out... an interest rate is charged on certain fees involved in a credit card," Gibbs said on Air Force One as Obama returned from a visit to Iowa.

Earlier Wednesday, Democrats in Congress widened their crackdown on the industry, which stands accused of tempting borrowers with easy credit in good times and clamping down hard with high rates and reduced credit lines when the economy went sour.

Members of the House of Representatives Financial Services committee voted to send a bill tightening rules on the industry to the full chamber.

New York Democratic Congresswoman Carolyn Maloney, who wrote the Credit Cardholders' Bill of Rights, said the legislation would level the playing field between cardholders and card companies.

"For too long the relationship has been one-sided; but markets function best when all sides know what they're getting into -- and these deceptive practices need to be stopped," she said.

"The Credit Cardholders' Bill of Rights brings more transparency to the contractual relationship and give consumers the tools they need to responsibly manage their own credit," Maloney said.

The legislation protects cardholders against arbitrary rate increases, ensures those who pay bills on time are not unfairly penalised and shields them from misleading terms and conditions in the small print of card contracts.

It also empowers cardholders to set their own credit limits and forces card companies to fairly allocate payments.

The White House has signalled that it plans to propose some changes to the legislation before it goes before the full House for a vote where it is expected to win significant support.

Prospects of credit card reform passing the Senate are more uncertain however, with opposition to such a move significant in the 100-seat chamber where 60 votes are required to pass major legislation.

A previous version of the bill, which barred such practices as retroactive rate hikes, passed overwhelmingly in the House last September but was killed off in the Senate.

Credit card firms have warned that proposed reforms could tighten an already frozen credit market which is already seen as a drag on recovery.

An administration official noted that Obama, who called for reform of the industry during his 2008 presidential campaign and while still a senator, did not want to punish the industry, merely to rein in unfair practices.

"The president recognises that credit cards are a critical source of liquidity and can be a last line of credit during hard economic times," the official said, noting that the industry provided US$4 trillion in available credit to US consumers.

- AFP/yb