If Capitol Hill lawmakers were playing a high stakes game of chicken with the banking industry over your credit score, guess who just blinked?
Mike Lillis, congressional reporter for our sister site The Washington Independent, examines the winners and losers in the latest setback on credit card reform to rein in outrageous rate hikes and hidden fees.
It’s one of the central components of the Democrats’ plans for reforming the finance industry this year, and among the most vital, supporters say, for protecting consumers from abusive lending practices in a tumbledown economy. Yet as Congress advances legislation reining in the most abusive credit card traps, both the House and Senate proposals have been watered down in recent weeks so that the protections likely won’t help card users for more than a year.
The delay — a concession to the banks, who oppose the changes — means that Congress’ reforms likely won’t arrive anytime sooner than the Federal Reserve’s new credit card rules, scheduled to take hold in July 2010. It also leaves consumers hung out to dry at an unwelcome time, as the recession deepens, unemployment rises and card issuers raise fees and interest rates on even their most reliable customers. Many observers wonder why, if some credit card practices are indeed unfair and deceptive — some say criminal — Congress isn’t acting more quickly to eliminate them. Some consumer advocates say the delay is yet another example of lawmakers prioritizing the banks above working families amid the downturn.
“While we expect the Fed to be weak and buckle under bank pressure, there is no excuse for Congress pandering to the banks and delaying implementation of legislation to stop practices that hurt working families,” Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group, wrote in an email. “Every day of delay is millions of dollars in unfair fee income. Every day of delay means more families cannot buy things to stimulate the economy (or save to buy things later), as they are forced to pay usurious credit card interest rates.”
The debate arrives as Democratic leaders are pushing legislation to restrict some of the finance industry practices that have been largely blamed for the current economic turmoil. Credit card reform is just one item on a list that also includes proposals to tighten regulations on mortgage lending and grant homeowners the option of bankruptcy to prevent foreclosure. But the power of the finance industry to sway Congress is never to be underestimated. Indeed, the mortgage bankruptcy bill has been stalled in the Senate for weeks, and reportedly faces an uncertain future despite robust support from Democratic leaders, including President Obama. The delay in the credit card reforms is just the latest example of what happens when leadership goals smack headfirst into political reality — and a lobbying juggernaut.
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