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Regional & National

White House and Congress target credit card rates

April 23rd, 2009 12:00 am by Staff Report

According to a USA Today report the movement to reform credit card practices is gaining speed as the White House and Congress target punishing fee practices they say are contributing to a growing number of Americans' financial distress.

President Obama and economic adviser Lawrence Summers are meeting today at the White House with executives from more than a dozen credit card companies to discuss whether, and to what extent, issuers' policies have saddled consumers with unaffordable debt. The administration — which scheduled the meeting at the request of some issuers — has promised to address credit card practices that Summers recently blamed for coaxing consumers "into paying extraordinarily high rates that they wouldn't have paid if they knew what they were getting themselves into."

The meeting comes as issuers aggressively raise borrowers' credit card rates to as high as 30% amid ballooning loan losses. Wednesday, the House Financial Services Committee approved legislation to crack down on issuers' ability to raise interest rates on existing credit card debt. A Senate bill would clamp down even more on how credit card issuers do business. These proposals — on top of recent restrictions imposed by the Federal Reserve — mark the most significant efforts to reform industry practices in decades.

"The sweep of this takes my breath away," says Robert Hammer, chief executive of R.K. Hammer, an investment bank that consults with issuers. "I've never seen anything like this in 30 years. Banks and credit card companies have a target on their foreheads."

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