An update on the Senate hearings, courtesy of the American Bankruptcy Institute:
Chairman Christopher Dodd (D-Conn.), in the first of a series of Senate Banking Committee oversight hearings to address credit card industry practices, said today that consumers are suffering from a “broken” disclosure system in the credit industry as penalty fees have skyrocketed from $1.7 billion in 1996 to $17.1 billion in 2006. Consumer advocates and academics testified that rather than deploying a risk-based system of issuing credit, issuers look to put as many cards in consumers’ hands and then profit off “tricks and traps†such as late payment fees, universal default rates and double-cycle billing, which were sinking students, seniors and other vulnerable low-income consumers further into debt. Harvard Law School Prof. Elizabeth Warren testified that the marketplace is made worse by BAPCPA, which removed bankruptcy as a credible threat against aggressive creditor practices. She said that debt collect ors “are bullying†consumers into believing that bankruptcy is now unavailable. To help alleviate some of the confusion, Sen. Daniel Akaka (D-Hawaii) said that he would introduce legislation titled the “Credit Card Minimum Payment Warning Act†that would go beyond the TILA notice enhancements made by BAPCPA for consumer credit card statements. Akaka said that the legislation would require companies to provide more customized disclosures for consumers to make more informed decisions in paying their outstanding balances. Industry representatives from CapitalOne, Barclays and JP Morgan said that they have made many improvements to their policies regarding disclosures, fees and penalties, but that the industry as a whole would continue to work to provide better information to consumers, improve financial literacy and eliminate anti-consumer practices. Click here to view the Senate Banking Committee’s hearing page with links to witness testimony.
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