Legislative Pressures Mount

  It will be interesting to see what transpires in the coming weeks in Congress, as at least two U.S. lawmakers appear poised to introduce legislation that could produce sweeping changes that affect how credit card issuers and cardholders work with one another.
  Last month, Rep. Carolyn Maloney, chair of the House Financial Institutions subcommittee, introduced 23 proposed reform principles that she says will serve as "pillars" of proposed legislation. Rep. Barney Frank, the House Financial Services Committee chairman, also has said he plans to hold hearings and introduce possible credit card-reform legislation this fall (see news story on page 8).
  An aide to Frank told Cards&Payments during Congress' recess in August that the two lawmakers will work together to develop legislation.
  Neither lawmaker is not acting in a vacuum, as each already has held meetings with representatives of various industry and consumer groups. Even Ken Clayton, the American Bankers Association's chief legislative counsel, has expressed gratitude for Maloney's willingness to promote dialogue between industry players and consumer groups when it comes to consideration of credit card industry reforms.
  Maloney's principles would ban universal-default practices and double-cycle billing, issues the industry already is addressing. But consumers also would be able to set their own due dates; make online, telephone or automated payments without charge; and cap or lower their own credit limits.
  Issuers would have to improve their communications with cardholders and address the sensitive nuances of different customer segments. They would be required to offer cards with fixed rates over fixed periods of time and to employ a different set of underwriting standards for groups with "special needs or limited incomes," such as students or the elderly. And issuers would have to provide clear notice and the opportunity for cardholders to opt out of card contracts when rates increase for any reason.
  Some industry insiders might argue that, if these proposals become law, Congress is not letting the free market dictate card policy. But it appears the industry has not done enough on its own in reaction to the market pressures that are building. Charge-off rates are on the rise once again, for example, as are bankruptcy filings.
  So why not let Congress provide a little persuasion? Maybe then lawmakers might let up on the topic of interchange reform and allow the free market to address that. Or, perhaps, they won't.
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