Geithner pushes for credit card reform

WASHINGTON — The Obama administration is pressing for passage of legislation to rein in credit card practices and eliminate sudden rate increases and late fees that have entangled millions of American consumers.

Treasury Secretary Timothy Geithner and Rep. Carolyn Maloney, D-N.Y., chief sponsor of a House bill, met Wednesday with representatives of consumer and civil rights groups to discuss the credit card overhaul. The gathering followed President Barack Obama’s meeting at the White House last week with executives of the credit card industry. Obama made clear he wants to sign a bill into law.

Measures before the House and Senate are designed to enhance protections for consumers. The House bill, scheduled for a vote on Thursday, would prohibit double-cycle billing and retroactive rate hikes and ban the issuance of credit cards to people under 18, but wouldn’t take effect until a year after enactment. Another requirement in the bill, that customers receive 45 days notice before their interest rates are increased, would go into effect in 90 days.

Similar regulations by the Federal Reserve don’t take effect until July 2010.

The administration’s efforts to revive lending and the economy will be complemented by an overhaul of the nation’s financial rule book to avoid a recurrence of the economic crisis while protecting consumers and investors, Geithner said in a statement.

“We need to change the rules of the game” to make the credit card business more transparent, fairer and simpler for consumers, Geithner told reporters after the meeting at the Treasury Department. “This administration and this Congress are committed to changing the system.”

Banking industry officials oppose the legislation, warning that the limits on credit card practices would prompt lenders to restrict credit in an already tight market or force them to raise interest rates and fees.

Aggressive action by the government in the face of the recession should gradually help bolster economic activity, the Fed said Wednesday as it left a key interest rate at a record low of between zero and 0.25 percent. The central bank decided against taking any new steps to shore up the economy though it did leave the door open to future action if needed.

Democrats are tapping into rising public anger over corporate excesses, and the conduct of banks and other companies receiving billions of dollars in taxpayer money.

U.S. credit card debt has jumped 25 percent in the past 10 years, reaching $963 billion in January, according to figures from the White House. The average outstanding credit card debt for households that have a card was $10,679 at the end of 2008, according to CreditCard.com, an online market.

Roughly 16,000 companies in the U.S. issue credit cards. The biggest lenders include Discover Financial Services LLC, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Capital One Financial Corp., American Express Co. and HSBC Holdings.

Amid the recession and rising job losses, consumers — even those with strong credit records — have been defaulting at high levels on their credit cards. Banks already battered by the mortgage and credit crises have been bleeding tens of billions in red ink from the losses.