Obama Pushes Credit Card Issuers on Fees, Rates

Don Miller — Mon, 27 Apr 2009 18:03:28 +0000

Executives from credit card issuers, including Bank of America Corp. (BAC) and American Express Co. (AXP), met with President Barack Obama last Thursday to make their case against new limits on transfer fees and higher interest rates.

But their pleas fell on unsympathetic ears as Obama pressed forward with plans for enhanced consumer protection laws that go beyond credit card restrictions approved by a U.S. House committee Wednesday.

The credit card executives requested the White House meeting as they face outcries of anger from beleaguered cardholders and Congress. Representatives from a “who’s who” of industry leaders attended, including Citigroup Inc. (C), Wells Fargo & Co (WFC), JPMorgan Chase & Co. (JPM), Capital One Financial Corp. (COF), Visa Inc (V) and MasterCard Inc (MA).

“They’re saying that the economic recovery will take longer if Obama takes punitive action against lenders, but the Obama folks…need more of an explanation,” Linda Sherry, director of national priorities at Consumer Action, a watchdog group that tracks credit-card practices, told Bloomberg News.

As unemployment and credit card delinquencies rise, card issuers are on the hot seat for imposing large late fees and slamming delinquent customers with huge interest rate increases.

Delinquencies are soaring throughout the industry in concert with unemployment, which reached a 25-year high of 8.5% in March. Charge-offs, which are loans that banks have given up on, increased to an average of 8.02% in February from 4.53% a year earlier, Bloomberg reported.

Capital One reported a $111.9 million first-quarter loss on higher reserves for soured loans on Wednesday. Bank of America reported a $1.8 billion first-quarter loss in its credit-card services unit.

Lenders have tried to protect themselves with late fees, tightening credit limits and closing accounts, angering both lawmakers and consumers.

The meeting came a day after a bill to curb credit card fees and limit penalties cleared a key panel in the House of Representatives

The legislation – called the Credit Cardholders’ Bill of Rights – stops credit card issuers from imposing arbitrary interest rate increases and penalties and halts onerous billing practices. A separate version of the bill is under review in the Senate.

Legislators have expressed outrage that many card issuers have received government bailout money under the Treasury’s Troubled Asset Relief Program, essentially paid for by the U.S. taxpayers who use the cards and are saddled with the high fees.

President Obama’s economic adviser, Lawrence Summers, last weekend accused the companies of enticing consumers with aggressive marketing campaigns and deceptive interest-rate terms, encouraging them to become “addicted” to credit.

The White House specifically wants any legislation to limit issuers’ ability to charge fees when customers exceed their credit limits. Obama’s chief of staff, Rahm Emanuel, recently told House Financial Services Chairman Barney Frank that Obama also wants card issuers to offer longer terms for introductory, low teaser rates.
The administration also wants card companies to apply excess payments first to balances with the highest interest rates, and to tell customers how long it will take to pay off their balances if they only make minimum payments.

The banks are saying the proposed regulations will make matters worse by raising costs, restricting credit, and ultimately hurting borrowers more.

“If the government keeps changing rules, it may make it harder for consumers to get credit,” Ken Clayton senior vice president of card policy at the American Bankers Association in Washington, told Bloomberg.

“It means less credit available to vast numbers of Americans at the very wrong time,” he said.

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Source: Obama Pushes Credit Card Issuers on Fees, Rates

Global Investing Roundups Friday, December 5th, 2008

William Patalon III — Fri, 05 Dec 2008 14:39:10 +0000

AT&T Disconnecting 12,000 Jobs; Credit Suisse Announces 5,300; Capital One Puts Chevy Chase in Its Wallet; Argentina Announces $3.9 Billion Stimulus, Jobless Benefits at 26-year High; Dupont Cuts 2,500 Employees; Williams-Sonoma Beats Estimates; Oil Falls 5%

AT&T Inc. (T) said it would scale back 12,000 jobs, about 4% of its workforce, between now and the end of 2009 to fight “economic pressures, a changing business mix and a more streamlined organizational structure.” It will also take a severance charge of nearly $600 million for the fourth quarter, Reuters reported.

Credit Suisse Group AG (ADR: CS) will scale back its workforce, eliminating 5,300 workers, or about 11% of its workforce. Switzerland’s second-largest bank will also nix bonuses for its top executives, Bloomberg reported.

Capital One Financial Corp. (COF) said it will acquire privately-held Chevy Chase Bank for $520 million in cash and stock, The Associated Press reported. Bethesda, Md.-based Chevy Chase Bank has branches primarily in Maryland, Virginia and Washington, D.C., and has about $11 billion in deposits.

Argentine President Cristina Fernandez de Kirchner said the government will offer 13.2 billion pesos ($3.9 billion) for an economic stimulus. The plan seeks to reduce loan costs to manufacturers, help finance new auto purchases and reduce export taxes on corn and wheat, Bloomberg reported.

The number of U.S. workers on unemployment benefits rolls soared to 4.09 million last month, the highest level in 26 years, according to the Labor Department. The four-week moving average of initial claims, a less volatile measure, climbed to 524,500, also the highest since 1982.

E.I. du Pont de Nemours & Co. (DD) said yesterday (Thursday) that it will not turn a profit in the fourth quarter, and consequently, will be forced to cut 2,500 jobs and release 4,000 contractors by the end of this year. “We expect 2009 to be a very challenging year,” said DuPont chief financial officer Jeff Keefer.

Williams-Sonoma Inc. (WSM) beat analysts’ third-quarter expectations, but the company’s revenue still fell 16% from a year ago, to $752.1 million. The company lost $11 million, or 10 cents a share, for the in the three months ended November 2, compared with a profit of $27.1 million, or 25 cents a share, a year earlier. Analysts’ average forecast was a loss of 11 cents a share, according to Reuters Estimates.

Crude oil prices fell more than 5% yesterday (Thursday) as employment and manufacturing data indicated the U.S. recession would be severe. Light, sweet crude for January delivery fell $2.49 to settle at $44.30 a barrel on the New York Mercantile Exchange.

Source: Global Investing Roundups, Friday, December 5th, 2008

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Obama Pushes Credit Card Issuers on Fees, Rates

Global Investing Roundups Friday, December 5th, 2008