Federal Government Should Set Standards for Taxpayer-backed Credit Card Debt
By Consumers Union on Wednesday, November 26th, 2008
The Treasury Department announced yesterday that it will provide $20 billion in bailout funds to back up a Federal Reserve Board “credit facility” program to purchase up to $200 billion in “non-mortgage asset backed paper” – including securitized credit card debt. That guarantee should come with reasonable standards for the credit card debt that will be eligible for taxpayer support.
We need standards to make sure that taxpayer money isn’t used to buy up securities that are backed by credit card debt that includes practices that rip off consumers:
1. No interest rate increase on money already borrowed. This would include an end to penalty interest rates on money already borrowed.
2. Solid underwriting for ability to repay. Taxpayers shouldn’t fund credit card debt unless the card company has determined that the debt can be repaid in a reasonable amount of time.
3. Only fees reasonably related to the costs of any services we’re getting for those fees.
4. The credit card contract and practices must meet all of standards described by the Federal Reserve Board in its May 2008 proposed rule against unfair or deceptive credit card practices–including dividing your payment fairly between your different interest rate balances.
If you want to help set these kinds of standards into law, check out http://www.CreditCardReform.org where you can support strong federal legislation right now!
Credit card issuers now have the ability to change the contract terms at any time, for any reason. If these big banks want to sell credit card debt to the Fed, with a partial taxpayer guarantee, make them first put an end to retroactive rate increases and high gotcha fees and practices. Let’s make sure taxpayer money that makes consumer credit available does it in a way that doesn’t harm us as card holders as well as taxpayers.
What standards do you think should be put in place if we are going to start backing credit card debt with taxpayer dollars?