Credit & Prepaid Cards

EXCERPT Mr. Chairman, Ranking Member Bachus, members of the Committee: Thank you for inviting the Center for Responsible Lending to discuss consumer financial products reform – a fundamental component of the effort to modernize and repair our financial regulatory system. Over the past decade, federal bank regulators looked the other way as responsible loans were crowded out of the market by aggressively marketed, tricky financial products carrying hidden costs and fees. Dangerous products, whose most "innovative" feature was their ability to obscure their true costs and risks, led a race to...

"Stacked Deck" is a statistical analysis of outcomes in forced arbitration, also called mandatory arbitration or binding mandatory arbitration, that finds: Individual arbitrators have a strong incentive to favor the firms that provide them with repeat business over an individual consumer they may never see again. Companies win a favorable ruling in arbitration far more often than consumers. Companies involved in the most arbitration cases--and therefore in creating the most business for arbitrators--consistently receive more favorable rulings than firms involved in fewer cases. Almost all...

A Comparison of House (Credit Cardholders Bill of Rights) and the Senate Amendment (formerly known as the Credit CARD Act) Legislation by the Congressional Research Service.

In this testimony, we first discuss why we support eliminating what is functionally discrimination in the law against the FTC in its rule-making authority, compared to other agencies. Section I. We also support the Congressional guidance to the FTC to use the APA rule-making in the area of consumer credit and debt, which we recognize to be central to the health of the economy as a whole. We first put that priority into context, with a general picture of the financial health of the majority of America's households. Section II. Turning to the specific areas identified in the bill, Section III...

Too often in the recent past, discussions over consumer protection regulation have been portrayed as a zero-sum game, where consumer protections are assumed to be a drag on the market, and must come at the expense of business. But that is a false dichotomy. Businesses have a symbiotic relationship with their customers. In the end, the health of the business community – indeed, the health of the economy as a whole – depends upon the financial health of America's households. Practices which undermine the financial health of households in the long run undermine the health of the businesses that...

CRL Offers Quick Snapshot of Recent Issuer Activity We took a quick sampling of credit card issuers' recent activities to see how they have responded to the Federal Reserve rule changes that were announced in December, 2008 but won't take effect until July, 2010. We found the top eight issuers, who account for 80 percent of credit card balances, are raising interest rates on a larger portion of customers than usual and increasing the number of fees they impose. The new Fed rule will ban some but not all of these activities. [i] Perhaps most notable is what these issuers? Citigroup, Bank of...

Download the executive summary (pdf) >> With roughly a trillion dollars in credit card debt, Americans have come to rely on their credit cards as both a form of payment for purchases and a flexible way to borrow cash. Credit cards are also a key source of income for financial institutions, with a rate of return that tends to be much higher than most other consumer loan products. While credit card companies compete to offer the lowest "headline" rates in solicitations, they also depend on less obvious tactics to boost their financial returns. Credit card issuers at one time charged a single...

Read the Executive Summary >> Americans have come to rely on their credit cards as both a form of payment for purchases and a flexible way to borrow cash. The total amount of credit card debt is approaching a trillion dollars. Credit cards are a key source of revenue for financial institutions and usually among the most profitable loan products available today. Credit card pricing has become highly complex and increasingly difficult for borrowers to follow. Credit card issuers at one time charged a single fixed interest rate to all customers and now charge individual customers several...