So far this session, Sen. Dick Durbin has stood
behind consumers like no other public official in Washington. He has served as the
Senate Democrats' de facto point man on student aid reform, mortgage bankruptcy reform, usury reform, financial product safety, and consumer credit abuse. And around every corner, he's been met
with resistance by banking industry lobbyists. In an interview with WJJG's Ray Hanania on
Monday, the senior senator from Illinois stated outright that the banks "own"
Capitol Hill. Listen (full audio here):
DURBIN: And the banks -- hard to believe in a time when we're facing a banking crisis
that many of the banks created -- are still the most powerful lobby on Capitol Hill. And
they frankly own the place.
The ongoing negotiations about credit card reform legislation nicely illustrate
Durbin's point. According to Hill sources, the U.S. House of Representatives is likely to vote on H.R. 627,
otherwise known as the Credit Card Holders Bill of Rights Act, as early as
Thursday. But it doesn't seem likely that the federal bill will be implemented quickly
enough to help strapped consumers this year. For that, we can thank the banks.
Last year, Rep. Carolyn Maloney (D-NY) proposed the bill of rights as a way to clean up
this unregulated industry. The bill would stop credit card
companies from raising interest rates on balances incurred under an old rate, would let
consumers pay off loans with higher interest rates first, and would stop unfair late fees
and universal default (the odious practice of raising interest rates on
accounts in good standing when a borrower falls behind on other bills). While the bill
eventually died in the Senate, Maloney reintroduced a similar version again this year and
it has since passed the House Financial Services Committee.
But there's a catch. Originally, Maloney's bill required the banks to change their
practices 90 days after passage. But a bipartisan group of lawmakers (including Rep. Luis
Gutierrez, a recent thorn in the side of consumer groups) amended the bill earlier this month, pushing the effective
date to either 12 months after passage or July 1, 2010. This had been a demand put forth
by the financial services industry, which claimed that the changes would neccessitate
countless hours to implement.
Why is that important? The Federal Reserve passed new credit card rules in December that are
scheduled to take hold in ... July 2010, rendering the Congressional legislation
rather meaningless. When the Fed announced its changes, Democrats decried the
extended timeline. But all it took was pressure from the banks to change their tune. And
that will have a painful effect on consumers in the interim, as the Washington
Independent's Mike Lillis writes:
That spells bad news for credit card users, as banks in recent weeks have installed a
series of fee and rate hikes to churn profits in a struggling economy. In many cases the
increases come without any warning to consumers, and they often apply to balances accrued
even before the hikes arrive.
Unfortunately the way the market place is working, [card users] could use more
protection, not less, said Graham Steele, an attorney at Public Citizens
Congress Watch. Consumers need relief now, and yet these bills are being
Meanwhile, Durbin's bankruptcy reform bill is on course to be gutted by the Senate today, according to the Huffington
Post's Ryan Grim. Just another example of Wall Street's outsized influence. (4.29.2009, Adam Doster)