Congressman Hodes Continues to Fight to Reform Financial Services Companies and Reign in Credit Card Abuses

October 15, 2009 -- Washington, DC -- Congressman Paul Hodes, a member of the House Financial Services Committee, released the following statement after a telephone press conference on reforming financial services and credit card company practices. Congressman Hodes was joined on the call by Dartmouth Professor Karl Griswold.

Professor Griswold’s credit card company arbitrarily lowered his credit limit while he was seeking to purchase his first home. This lowered credit line resulted in a deduction in his overall credit score and has hurt his buying power as he continues his search for a first home.

Article continues below...

"Karl’s story is one of many examples of credit card companies trying to skirt new rules before they go into effect," said Congressman Hodes. "I have heard from thousands of Granite Staters who are concerned about rising interest rates and sudden changes in credit card contracts. We need to put tough new rules into effect as soon as possible, to stop these companies from taking advantage of people. In the coming weeks, I will fight to put Main Street first and protect working families. We must protect consumers from these types of practices and end the policies that hurt middle class families."

Credit card companies are suddenly raising rates and changing contract terms for consumers in New Hampshire and across the country just months before it will become illegal to do so. While some companies, including Bank of America and Discover, have pledged not to raise interest rates, other companies like Chase continue to alter consumer contracts while posting enormous profits. On Thursday, JP Morgan Chase, the parent company of Professor Griswold’s credit card issuer, reported a third quarter profit of $3.6 billion.

"Credit card companies have proven that they can’t be trusted to do what is right for Granite Staters," added Congressman Hodes. "We need these tough new rules now to protect consumers and investors so that profits on Wall Street don’t come at the expense of Main Street. By enacting common-sense solutions, closing loopholes, and eliminating excessive risk, we can avoid the mistakes of the past that caused this current economic crisis."

Congressman Hodes supported the Credit Card Accountability and Disclosure (CARD) Act of 2009 that became law in May of 2009. The CARD Act will make it illegal for credit card companies to raise interest rates on existing balances unless the consumer has not made a minimum payment in 60 days. The legislation will also end double-cycle billing, require at least 45 days of advance notice before any interest rate increase, and prevent interest rate increases during the first year of a new account. The CARD Act included a February 2010 start date for new regulations in order to give credit card companies time to put systems in place to ensure that they comply with the new rules.

Instead of using the interim period to prepare for the new regulations, credit card companies are ramping up the very practices that this legislation will make illegal. Congressman Hodes supports legislation to move up the effective date of the new regulations. He supports the Expedited CARD Reform for Consumers Act of 2009, which would put these new regulations into effect on December 1, 2009 instead of February 2010.

This week, the House Financial Services Committee is also beginning consideration of two critical pieces of legislation. The Consumer Financial Protection Agency (CFPA) Act would create an agency that is responsible for all consumer-focused regulations in financial services. Currently, these responsibilities are assigned to existing regulators including the Federal Reserve and Federal Deposit Insurance Corporation (FDIC). The CFPA would have the authority to set standards for traditional mortgages, as well as oversee non-bank entities that are not currently regulated. Financial institutions would no longer able to seek out the weakest regulator to provide oversight to their organization.

The Committee will also begin consideration of the Over the Counter (OTC) Derivatives Markets Act. This legislation would reduce the risks that derivatives, which are largely unregulated now, could pose to the economy as a whole.

Source: Congressman Paul Hodes