Banks threaten consumers over new credit card rules

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The banking industry is making clear today that it won’t go quietly along with Congress’ credit card reforms, even after the Senate today passed its version of the card bill by a vote of 90-5.

Once the Senate bill gets squared with the House version later this week it will go to President Obama for his signature.

Bankers were irate about the measure from the get-go, asserting that Congress was unfairly meddling in restricting card interest rates and fees. Key provisions are aimed at stopping banks from raising rates without giving at least 45 days notice (instead of 15) and requiring that banks apply payments to the portion of the balance with the highest interest rate first.

‘We are concerned that the Senate bill will have a dramatic impact on the ability of consumers, students, and small businesses to obtain and use credit cards,’ the American Bankers Assn. said in a statement attributed to CEO Edward Yingling.

In other words, they’re threatening to raise fees and limit card availability across the board.

How, exactly, that would be good for their business isn’t clear to me. But this is what people with good credit have feared: That banks would make them pay up if the lenders couldn’t squeeze more out of people whom they deem to be higher risks.

The scaremongering was in full effect in a New York Times story today that raised the prospect of annual fees for cards returning in a big way.

Yet it’s hard to understand why even good credits would oppose many of the measures in the Senate bill, including restrictions on marketing cards to young people, and a requirement that bills be mailed to consumers 21 days before they’re due.

Undaunted, the ABA asserts that the bill ‘fundamentally changes the entire business model of credit cards by restricting the ability to price credit for risk.’

The entire business model? Really?

‘The goal in the legislation should be to obtain the right balance:providing protections, while maintaining the important role of credit cards in providing loans to consumers and small businesses,’ the ABA said. ‘Unfortunately, we believe the bill does not achieve that balance and will therefore cause an unnecessary decrease in credit availability.’

If they really want to aggravate their best customers, they may have to factor in the risk that Congress could come back and hit them even harder.

Better to count your bailout money and dim the rhetoric, boys.

-- Tom Petruno