Bitter sweet victory for consumers: The Credit CARD Act becomes law today

Today, consumers can celebrate a major victory: The Credit CARD Act becomes law, meaning increased consumer protection for credit cardholders. After a year of heightened consumer outrage against banks and legislative wrangling to craft a consumer-friendly bill, cardholders finally receive much needed relief and protection—the most sweeping in history.  However, the victory is more bitter than sweet. It is like winning the silver medal in an Olympic competition that you think you have won.

As evinced by credit card companies raising interest rates and changing terms to preempt the enactment of today’s new law, the victory will be short-lived.  In other words, consumers will end up paying more money through new fees and “legal” changes. If anything, this victory is one of principal more than one of net savings.     

“Frontline” documentary examines the present and future credit card industry

The New York Times and the PBS program “Frontline” have joined forces once again to produce an expository documentary about the credit card industry and its latest developments.  The joint reporting project, which debuted on Nov. 24, 2009, also includes a series of articles available on the New York Times’ website.

Whereas the previous collaboration entitled “The Secret History of the Credit Card” focused on the history of the industry, this new collaboration entitled “The Card Game” focuses on the present and future.  In the beginning, the documentary follows the same formula as the previous feature released in 2004, highlighting specific cases in which customers were abused and confronting industry experts for an explanation. Later, it explores how the economic collapse triggered credit card reform, which Harvard Law professor Elizabeth Warren explains “won’t change the game”.  It ends by revealing what to expect in the near future.  

Great Scott! Massachusetts Senate upset could kill financial reform

Scott Brown’s astonishing upset in the Massachusetts Senate race has Democrats aghast, wondering how in the world did a Democratic bastion fall into the hands of the Republican Party. Now that the Democrats have lost their super majority in the Senate, several crucial bills are at stake.

As a result of the Democratic debacle, political pundits have focused on the likely and immediate demise of health care legislation, the controversial bill that pushed Brown to victory.  However, few pundits are discussing the possibility that financial reform could face a similar fate.  

Barney Frank releases memo to dispel inaccuracies about CFPA exemptions

Washington, DC – Today, House Financial Services Committee Chairman Barney Frank (D-MA) released the following memo to members of the House Financial Services Committee: 

January 21, 2010

MEMORANDUM

TO: Members, Committee on Financial Services

FROM: Chairman Barney Frank

RE: Inaccuracies about CFPA Exemptions

Some inaccuracies have appeared in the press about institutions exempted from the reach of the Consumer Financial Protection Agency in the House-passed financial reform bill.  For instance, yesterday’s New York Times reported that it “exempted smaller community banks, credit unions, retail merchants …”.  Not true.  All of those institutions will be subject to all rules issued by the agency with respect to the extension of credit.  They also will be subject to agency enforcement.  The exemption for smaller financial institutions is only with respect to examination which will continue to be the responsibility of the institutions’ prudential regulators.  However, the CFPA will have back-up inspection authority and may independently take enforcement action.  And even this exemption is limited to institutions with less than 2% of bank assets.

Importantly, the new agency will also have authority with respect to the now lightly or unregulated institutions such as pay day lenders and check cashers firms which are especially important to lower income families.  It also will have authority over independent mortgage brokers and lenders that led the industry in issuing subprime and abusive option ARM mortgages.

Senator Dodd’s legacy, a fighter for financial reform

I am almost embarrassed to admit it: The first time I heard of Senator Christopher Dodd (D-CT), I was watching “Late Night with Conan O’Brien” a few years ago.  In one of his reoccurring, comedic interludes, O’Brien compared Mr. Dodd’s headshot with that of an animated Simpsons character, I believe, saying that they looked just alike. Since then, I have forgotten who the “twin”, animated character was and learned much about Mr. Dodd.  (I will exchange my chagrin with pride now, realizing that my political IQ has increased tremendously at the expense of my knowledge of pop culture.)

Earlier this week, Mr. Dodd announced his plans to retire from the United States Senate where he has served for almost 28 consecutive years.  While his announcement (made amid a flurry of controversy regarding his diminishing popularity and ability to maintain his seat) was not shocking, it certainly was disappointing to learn that one of the most powerful fighters for consumer rights is leaving.  As chairman of the Senate Banking Committee, Mr. Dodd was especially vociferous about the need for change to the credit card industry. 

Mr. Dodd’s political legacy will be, in general, his passionate advocacy for financial regulation and, in particular, the passage of his Credit CARD Act of 2009. Furthermore, he will be remembered for standing up for and sticking with unpopular ideas like credit card reform decades before any significant legislative reform was enacted.  While the verdict is still out on the Credit CARD Act and considering that many believe the timidity of some of Mr. Dodd’s regulatory policies are self-defeating, this much is clear: Consumer advocates and financial reformists alike have lost significant ground in the fight to ensure equity in our financial system.  I doff my hat to Mr. Dodd.

In a statement distributed on Jan. 6 by House Financial Services Committee Chairman Barney Frank (D-MA), Mr. Dodd is lauded:

I am officially back and on the front lines

I have great news: I am back!

As mentioned in my last post about five months ago, I ran for state representative here in Atlanta, Georgia. The seat was vacated in April, so I felt like I had a good chance of winning. Thank you all so much for your patience and encouragement during the special election, which was a wonderful experience.

Why my sudden hiatus? VoteKevinJohnson.com

A few of you have sent me e-mails, asking what I have been doing.  Thanks for your concern.  Given that I have not posted an entry during the last two weeks, I thought I would let you all know what has been taking up so much of my time.

In a nutshell, I have been preparing to run for office.  In fact, I declared my candidacy today for Georgia State Representative House District 58, which encompasses most of the communities in East Atlanta.  This effort takes up my time entirely. It requires a lot more of my time than I thought, especially since the election is a special election likely to be held in November. (The incumbent resigned because of a conflict of interest with her new job. The seat is open, and it is a great opportunity.)  

Credit CARD Act contains amendment inspired by this campaign

Despite the fact that the Credit CARD Act does not outlaw credit card redlining, I am proud of this campaign’s unyielding demand for change, which led to an important amendment in the final bill signed by President Obama on May 22. 

The amendment, found in Section 505, requires within one year of the bill’s enactment that the Federal Reserve, Federal Trade Commission, and other federal banking agencies report to the House and Senate banking committees to what extent banks assess a customer’s credit worthiness based on where he or she shops.

While waiting for the report—which will serve as the basis for recommended regulatory or statutory changes—I will continue to work with legislators at the federal and state level to fight for and craft stronger credit card regulation.  Until the dignity and merit of responsible consumers in my beloved community are respected, this will be an issue for which I fight passionately.

[ Read Section 505 of the Credit CARD Act. ]

Credit Cardholders’ Bill of Rights clears the House 357 to 70

The Credit Cardholders’ Bill of Rights cleared the House 357 to 70 on Thursday, Apr. 30.  The bill, which was created to provide protection for and relief to credit card customers, restricts credit card practices such as sudden interest rate hikes and exorbitant fees. 

The same legislation, save a few changes and amendments, passed the House in September of last year, but died before it could be approved by the Senate.  As a result of continued bipartisanship on the issue, the likelihood of the bill passing the Senate in the next few months is promising at best. 

Obama admonishes credit card company executives

In what seemed more like political posturing than a substantive meeting with credit card industry executives, President Obama outlined his ideas for increased credit card regulation and reaffirmed his support of pending legislation that will better protect consumers against abusive credit card companies.

Executives from Visa, MasterCard, American Express and others met with the president and his staff in the White House to discuss growing consumer outrage about credit card companies, many of which have shamelessly raised interest rates, reduced credit lines, and canceled accounts.

President Obama, who has supported credit card regulation long before winning the presidency, is using his influence to encourage issuers to willingly accept increased regulation and to persuade reluctant Republicans needed to pass pending legislation. 

After the meeting, executives from the companies were nowhere to be found for comment.  It is likely that they had important meetings to attend—with their D.C. lobbyists. 

[ Read the White House’s blog or view ABC News video footage.]

Bill to prohibit blacklisting passes in the Maryland House

On Friday, Mar. 27, the Maryland House of Representatives passed “House Bill 1292 Consumer Protection – Blacklist Prevention”, which prohibits the use of merchant “blacklists” by banks to reduce a customer’s access to credit.  The bill received overwhelming support with 132 yeas, 6 nays, and 3 absent.  Next, a hearing will be scheduled in mid-April for the Senate Finance Committee.  The bill was inspired, in large part, by my efforts to expose American Express’ use of such blacklists.

In my opinion, this is a major step of many in the right direction to prohibit perhaps the most outrageous practice by credit card companies and banks.  I commend the Maryland House for making a bold statement of solidarity on this issue and hope that the Senate will do the same in the coming weeks. 

Having testified in the first hearing for the bill, I am especially excited to see that at least one state is being proactive to protect its residents from grossly unfair policies.  Also, I hope that the legislation and tremendous support of it will encourage you, the consumer, to urge your representatives to draft similar protective legislation. 

Senate Judiciary Committee to hold hearing on abusive credit card practices

On Tuesday, Mar. 24 at 10 a.m., The Senate Judiciary Committee will hold a hearing on “Abusive Credit Card Practices and Bankruptcy”.  The hearing will be conducted by the Subcommittee on Administrative Oversight and the Courts. 

The biggest obstacle to consumer protection: Federal preemption

The main impediment to protecting consumer rights is the federal government. 

In recent years, the Office of the Comptroller of the Currency, a federal regulatory agency, has preempted the states’ authority to enforce consumer protection laws against federally chartered banks. Consequently, state lawsuits against national banks have been co-opted or classified as improper “visitation” by the federal government.  Likewise, state bills for consumer protection have been quashed for overstepping jurisdiction.

On Feb. 25, the National Association of Attorneys General sent a compelling letter to President Barack Obama addressing the issue of preemption.  The letter, which is signed and supported by a majority of United States attorneys general, strongly urges President Obama to “reconsider the United State’s legal position regarding the Office of the Comptroller of the Currency’s (“OCC”) current interpretation of its authority under the National Bank Act.” The association believes that the interpretation, which excludes “State Attorneys General from their traditional role as primary consumer protection officials and enforcers of state law”, is “an extreme one that flies in the face of traditional principles of federalism.” 

Video of Maryland bill hearing against “blacklisting”

As I have mentioned a few times before, Maryland State Representative Saqib Ali introduced promising and unprecedented legislation on Feb. 13 in the Maryland General Assembly to prevent blacklisting, a form of discrimination akin to credit card redlining.  The bill hearing took place last week on Mar. 11 in the afternoon.  There is no opposition panel because the banks did not show up.  I did find out, however, that American Express will have a private meeting with Chairman, Dereck Davis, on Monday, Mar. 16.   

Order of speakers and start time:

00:00 – Dereck Davis, Chairman of the Maryland House of Representatives Economic Matters Committee, Member of the Maryland House of Delegates
from the 25th District

00:50 – Saqib Ali, Member of the Maryland House of Delegates from the 39th District

14:35 – Kevin D. Johnson, Consumer Advocate, Creator of NewCreditRules.com, President of Johnson Media Inc.

20:49 – Steven M. Sakamoto-Wengel, Consumer Protection Counsel for Regulation, Legislation & Policy, Consumer Protection Division, Office of the Attorney General of Maryland

22:10 – Dr. Charles Shafer, Maryland Consumer Rights Coalition, Professor of Law University of Baltimore

24:04 – Tom Saquella, Maryland Retailers Association

26:15 – Question and Answer Session

29:32 – End

AP report: Jobless hit with bank fees on benefits

Given that most consumers cannot understand their credit card terms, I am not surprised that many states would agree to contracts that allow banks to charge excessive fees on prepaid cards for the unemployed. Likewise, I wouldn’t be shocked to learn that the lure of money in the form of tremendous savings, kickbacks, or even campaign contributions helped to persuade decision-makers to side with the banks at the expense of citizens. It seems like trickery, get-rich schemes, and insensitivity are especially rampant these days. In my opinion, this is exactly what happened in the latest story of shameless artifice perpetrated by major banks. 

Banks a no-show at bill hearing

The bill hearing that took place on Wednesday, Mar. 11 to outlaw merchant blacklisting was a success.  Before the Maryland House of Representatives Economic Matters Committee, The Honorable Saqib Ali presented a cogent case on the need to prohibit the use of merchant “blacklists” by banks to reduce a customer's access to credit. 

Read my testimony for today's Maryland bill hearing

As I mentioned yesterday, I am in Maryland to testify for a bill that will prohibit blacklisting in Maryland.  During my stay in the Washington, D.C. area, I will also meet with federal government agencies and trade organizations that are working hard to increase regulation for credit card companies. 

A young Maryland delegate, Saqib Ali, invited me to testify in support of his bill and represent customers affected by blacklisting.  He boldly proposed legislation in February that will stop the discriminatory data-mining practices by companies like American Express in Maryland. He is the first person in the country to propose this much needed legislation.  My hope is that the bill will pass and set an example for the rest of the country.  Moreover, I hope it will gain the attention of the federal government to pass  similar legislation.  

You can read the text of my testimony below. I will have video of the hearing soon.

Promising legislation introduced in Maryland to stop consumer profiling

I am excited and pleased to announce that Maryland State Representative Saqib Ali introduced promising and unprecedented legislation on Feb. 13 in the Maryland General Assembly to prevent the type of consumer profiling to which American Express reluctantly admitted only after tremendous public pressure. 

Ali’s bill is the first legislative attempt on either a state or federal level to curb the discriminatory practices brought to light in large part by this campaign.  If passed, the bill will be a major step toward holding companies that engage in this behavior accountable.   

The bill, “House Bill 1292 Consumer Protection – Blacklist Prevention”, prohibits blacklisting by adding to Maryland’s commercial law. In short, the bill prevents companies from using where a customer shops or the company with which he or she has a mortgage to adjust contract terms, and it requires consumer contracts to disclose any prohibited provisions that will cause an adjustment in terms adverse to the consumer. Furthermore, any changes to the contract adverse to the consumer will require the consumer’s prior written consent. 

A hearing will take place on Mar. 11 in Annapolis, Maryland.  I will be there to support the bill and testify.  Proponents of the bill expected to testify include representatives from the Maryland Retailers Association, the Maryland Attorney General’s Office, and others.  Opponents likely to testify include representatives from the Maryland Bankers Association, American Express, and Bank of America. 

[ Read the bill. ]

Note:  If you are a Maryland cardholder affected by consumer profiling, please contact me. Click on the E-mail Me link above in the navigation bar.

The Credit CARD Act is great, but not strong enough

Given the current credit crunch, Congress is moving quickly to reform the credit card industry.  Hopefully, these unprecedented, economic circumstances will give reformers the extra support needed to finally be successful. 

During the last two decades, a handful of courageous legislators in both the House of Representatives and the Senate have crafted and introduced legislation to protect consumers from the harmful practices of credit card companies.  However, few proposals have received the widespread support needed to become laws.  Detractors of credit card reform often cite that such restrictive legislation will stifle competition; will prompt credit card companies to raise interest rates; and will make it more difficult for low-income consumers to obtain credit. 

Be my valentine, Congresswoman Maxine Waters

In keeping with the amative spirit of Valentine’s Day weekend, I have decided to dote on Congresswoman Maxine Waters for having the chutzpah to ask real questions and to demand real answers from the eight C.E.O.'s whose companies have received TARP funds, yet have failed to loosen the credit markets adequately.  As opposed to many of the other representatives who cautiously tiptoed around alarming issues during the House Financial Services Committee hearing last week, she challenged the smug C.E.O.'s without fear.  Her tone, brusque and highhanded, rightfully conveyed the rage of tax-paying citizens across the nation.  

What’s your credit score, President Obama?

The presidential race is over, and now we have a new president.  But I would like to go back a few months and ask the front-runners, Senators Obama and McCain, about their financial history.  Sure, I’d like to see tax returns from the last five years, but more than that I’d like to see credit reports and scores while we’re at it.  I suppose how well each politician manages his personal debt will be a good indicator of how well he will manage this country’s massive debt.  

How politics play a part in all of this

One suggestion that continually pops up in the hundreds of e-mails I receive is the idea that I run for congress.  Inspiring words commend my temperament among other characteristics, and one person even said that I have handled myself like a “true statesman”.  I humbly replied to all of those e-mails by saying the following: “While I follow politics closely and believe in the political system to effect change, I do not think politics is a good career path for me. Besides, I just got married, and I can barely pass a bill in my own house let alone the U.S. House of Representatives. =)”  

So, the practical goal for now --since a run for congress would take too long and by then, we would have all paid millions of dollars in unfair fees and interest—is to contact current elected officials who can bring about change now. Encourage and applaud representatives like New York’s Carolyn Maloney, co-author of the Credit Cardholder’s Bill of Rights.  Support Financial Services Chairman Barney Frank who also supports credit card reform.  More importantly, reach out to your local legislators and let them know how you feel and what you’d like to change. Then, hold them accountable.  

Below is a great web site to locate all of your elected officials.  

Find your local officials:  
http://www.usa.gov/Contact/Elected.shtml