Two high-ranking Democratic Senators called Thursday for the Federal Reserve to impose an emergency freeze on credit card interest rates.
Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Sen. Charles Schumer (D-N.Y.) asked Federal Reserve Chairman Ben Bernanke and other regulators to invoke emergency powers to immediately implement a rule, scheduled to go into effect in 2010, that would prevent credit card companies from retroactively hiking interest rates on existing card balances.
“Over the past year, the Federal Reserve has cited the financial crisis as one of the reasons for acting quickly to implement new lending facilities and programs to protect financial institutions,” the two wrote. “It is long past time for the regulatory agencies to act with the same sense of urgency to protect consumers from the behavior of those same financial companies.”
The letter comes as credit card executives are set to meet with President Obama this afternoon at the White House to discuss stronger consumer protections in the credit card market.
Read Dodd and Schumer’s letter after the jump.
April 23, 2009
Ben S. Bernanke
ChairmanThe Federal Reserve Board
20th Street and Constitution Avenue, NW
Washington, DC 20551John E. Bowman
Acting Director
Office of Thrift Supervision
1700 G. Street, NW
Washington, DC 20552Michael E. Fryzel
Chairman
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428Dear Chairman Bernanke, Director Bowman, and Chairman Fryzel:
We write to you today to urge you to use your emergency authority under the “good cause” exception to the Administrative Procedures Act, to immediately implement the provision in the final rules you have previously issued concerning interest rate increases on existing balances for consumer credit cards. The rules are currently scheduled to become effective in July 2010. As you are also aware, Congress is working on legislation to strengthen these rules and provide additional protections for consumers. As Congress works to pass this legislation, and before your rules become effective, issuers continue to operate using unfair and deceptive acts and practices.
Credit card providers have been aggressively raising rates on consumers now to avoid the ramifications of this rule when it goes into effect next year. Companies have increased interest rates across the board now, to increase interest rates before the new rules go into effect. Consumers describe situations to our offices in which the interest rates on their accounts have doubled or tripled overnight, without any misconduct on their part. This kind of practice clearly violates the spirit and intention of the rules, even if the delayed implementation date has the effect of making such behavior legal.
The OTS, NCUA and Federal Reserve have all used this emergency authority numerous times since 2007 to implement rules without public notice or comment, and to make final rules effective immediately. Over the past year, the Federal Reserve has cited the financial crisis as one of the reasons for acting quickly to implement new lending facilities and programs to protect financial institutions. It is long past time for the regulatory agencies to act with the same sense of urgency to protect consumers from the behavior of those same financial companies. Therefore, we strongly urge you to utilize your emergency powers to put this rule into place immediately and protect consumers from these outrageous rate increases.
Thank you for your consideration of this matter. Please don’t hesitate to contact our staffs any information or questions.
Sincerely,
Charles Schumer
United States SenatorChris Dodd
United States Senator