WASHINGTON — Some practices in credit cards, such as fluctuating interest rates, are so confusing they are indefensible and should be deterred, said Sen. Tom Carper, a senior member of the Senate Banking Committee.
"The idea of being able to change interest rates sort of like any time, any place … retrospectively and prospectively," is hard to defend, the Delaware Democrat told reporters Wednesday after speaking at a card symposium on Capitol Hill.
Sen. Carper said he welcomed a proposal from the Federal Reserve Board to make card disclosures easier to understand. Specifically, he said he favored the idea of informing cardholders how long it would take to pay off balances when making only the minimum payment.
"It would be helpful if I could find out if I paid like X dollars per month, how long would it take for me to pay off my bill," he told reporters.
During his speech, Sen. Carper, who has trumpeted the benefits of credit cards in Senate hearings meant to question their practices, acknowledged the fact that 60% of issuers have some sort of operation in his state.
"In my state, credit cards are a big deal," he said.
It is "appropriate" for lawmakers such as Senate Banking Chairman Chris Dodd and Sen. Carl Levin, who chairs the Permanent Subcommittee on Investigations, to dangle the "threat of legislation" to spark issuers to clean up their practices, Sen. Carper said. However, "I don't know how realistic it is that we are going to enact legislation."
He also backed a plan floated by Rep. Carolyn Maloney, a fellow symposium speaker. The New York Democrat, who chairs the House Financial Services financial institutions subcommittee, is holding a summit to encourage issuers to adopt best practices that would be recognized as a "gold standard."
Sen. Carper said he would try to encourage Sen. Dodd to hold a "mini summit" on cards. "We should work together on that," he told Rep. Maloney after his talk.
Sen. Carper also said the Banking Committee should hold another hearing with regulators to discuss proposed disclosure changes in the Fed's review of Regulation Z, which implements the Truth-in-Lending Act.
In her speech, Rep. Maloney praised the Fed's proposal but reiterated her stance that "even Reg Z and the best disclosure may not be enough to resolve some of the … abusive practices that have attracted the most criticism."
