Credit Card Companies Put “On Notice” by Senate Banking Committee
By Justin McHenry
The Senate Banking Committee held a session this past Thursday titled “Examining the Billing, Marketing, and Disclosure Practices of the Credit Card Industry, and Their Impact on Consumers” in which Chairman Christopher Dodd of Connecticut offered the following warning: “I would like to put the credit card industry, issuing banks and card associations on notice. If you currently engage in any business practice that you would be ashamed to discuss before this Committee, I would strongly encourage you to cease and desist that practice. Irrespective of the current legality of such practices, you should take a long, hard look at how you treat your customers, both in the short term and the long term.” On the other hand, Dodd said he supported the credit card as a financial product and did not advocate against their use.
The hearing gave both credit card industry representatives and consumer advocates the chance to tell their sides of the story. Consumer advocates complained that credit card companies use a variety of practices to pad fees and deceive consumers, including: universal default clauses that allow them to raise rates if customers are late on bills unrelated to their credit cards, two-cycle billing that allows companies to charge interest on balances that may have been paid in a previous billing cycle, charging late fees on payments received hours after a mid-day cutoff time, and generally giving themselves the ability to change card terms with as little as 15 days notice.
Credit card companies acknowledged that credit card disclosures could be improved, but claimed that it was not in their best interests to have customers who couldn’t pay off balances, and said that in fact very few of their customers carry balances and get hit with the fees described.
More hearings on credit card practices are planned, and the tone of this hearing suggests credit card companies will be expected to make some changes if they want to avoid greater government oversight or legislation that would control their business practices.
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