Lawmaker Takes Steps to Reform Credit-Card Industry
As more small firms turn to credit cards as a means to finance their businesses, lawmakers and others are more closely examining the need for more transparency in the credit-card industry.
The chair of a House subcommittee overseeing financial issues on Friday offered four principles to serve as the foundation of credit-card reform legislation she plans to draft during the August congressional recess to guide industry self-regulation.
Rep. Carolyn Maloney (D-N.Y.) said the principles partly are a product of two hearings she held on the issue and a July 30 roundtable she hosted that brought together credit-card issuers with lawmakers and consumer groups.
Maloney, who chairs the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, has posted the principles (pdf) on her Web site, where she invites public comment on them. The pillars of the upcoming legislation say issuers should:
1. Offer credit cards on terms an individual can repay.
2. Clearly explain account features, terms and pricing at relevant times.
3. Provide customers adequate notice and options in regards to changes in terms.
4. Encourage responsible credit use, especially among new credit-card holders and customers with special needs like students or the elderly.
Maloney expects to introduce her bill by the end of September and hopes it will be before the full committee by October, she said during a Friday morning conference call.
The chairman of the Financial Services Committee, Rep. Barney Frank (D-Mass.), strongly favors more accountability and transparency throughout the credit card industry.
Maloney said the Federal Reserve's proposal to offer a new set of credit card regulations was "welcome" but legislation was needed to "put the force of law behind it."
"Many people feel that disclosure is not enough," she said, adding that issuers must offer more clarity in explaining the account features and pricing.
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