November 26, 2009
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Senator Levin Addresses Feds, Pt.2
Inadequate Federal Reserve rules.In response to the Subcommittee's recommendations, the Governor's Board instituted rules under the authority of the Federal Trade Commission Act which prohibited some of the credit card industry's abusive practices. However, the rules did not embrace all the unfair and deceptive abusive practices. As a result, Senator Levin and the Subcommittee requested that the Board adopt additional provisions outlined by Senators Levin's and Chris Dodd's (D-CT) Credit Card Accountability, Responsibility, and Disclosure Act of 2008. The Subcommittee determined that the credit card companies' benefits of the abusive practices were too great to expect they would be willing to end them voluntarily. As a result, the new CARD Act of 2009 was introduced and passed into law.
Research by Pew Charitable Trusts indicated that 100 percent of the top 12 credit card companies have participated in unfair or deceptive practices as defined by the Federal Reserve rules. Furthermore, they would they meet the guidelines of the new credit card reform legislation. Additionally, the recession has placed most lenders' card portfolios at high risk. As a result most lenders have tightened credit approval standards, increased interest rates, instituted more fees, switched from APR to variable interest rates, closed accounts, and slashed credit limits, which has placed an even greater burden on the shoulders of Americans. A small number of lenders have pulled practices in alignment with the new CARD Act; however, a large number have continued to design "new mechanisms to evade or circumvent the law."
The new Card Act was adequately written under the credit environment that exited at the time the law was passed. However, with the continued and increasing incidents of additional abusive practices on the part of credit card companies, further strengthening is necessary to deal with these emerging abusive acts that have "threaten to undermine the statutory protections, even before they have been implemented."