Don’t Hamstring Consumer Regulator’s Ability to Rein In Credit Card Abuses, Says Consumer Watchdog

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Amendments Could Strip Proposed Agency’s Authority to Investigate Penalties on Credit Card Users Based on Where They Shop
Washington, D.C. — A new financial regulator charged with consumer protection must have the authority to oversee the full range of credit practices, including moves by credit card companies to penalize consumers based on where they shop, said Consumer Watchdog today. Amendments proposed by House Financial Services Chairman Barney Frank could limit the ability of a Consumer Financial Protection Agency to investigate companies that collect consumer financial data that is used to change the terms, and cost, of credit.
According to reports on CNN and other networks, Kevin Johnson’s credit card company lowered his credit line by $6,200 based in part on where he shops. The letter from American Express informed Johnson that they were lowering his credit limit because: “Other customers who’ve used their card at establishments where you recently shopped have a poor repayment history with American Express.”
“Dinging consumers based on where they shop is just the kind of behavior by the credit industry that financial regulators should be investigating. Consumers should know if an effort to be more frugal and shop at Sears instead of Pottery Barn will cost them more at the end of the day,” said Carmen Balber, Washington director for Consumer Watchdog.
A discussion draft of legislation to create the Consumer Financial Protection Agency removed a provision that appeared both in the administration’s version of the bill and the original Frank proposal that gave the agency authority over companies that collect consumers’ financial information.
“A fear campaign about the dangers to consumers of strong financial oversight just isn’t believable when it comes from the very companies whose greed and complete lack of regard for their customers brought us this financial meltdown. Their goal is clear – do everything in their power to escape real oversight, ” said Balber.
Key provisions of the legislation remain in the discussion draft, including the retention of rulemaking, examination and enforcement authority for the Consumer Financial Protection Agency, and protection of states as local first responders on financial abuses by prohibiting the agency from overriding stronger state laws. Eliminating either provision would cripple strong consumer protection, said Consumer Watchdog.
The draft also eliminates a requirement that banks offer a so-called “plain vanilla” option – a standard understandable contract to allow consumers to compare products across companies.
A hearing on the Consumer Financial Protection Agency, and Chairman Frank’s discussion draft, is scheduled for 10 am Wednesday in the House Financial Services Committee.
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Consumer Watchdog is a nonprofit, nonpartisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, CA. Find us online at:

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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