Afterward, Obama said that he had a "constructive meeting" with the heads of card issuers. The President addressed the credit card industry's role in building a "sustainable model for economic growth that wasn't based on bubbles and over-leveraging on the part of businesses and consumers."
Obama also communicated that "credit cards are an important convenience for many" and that reform was necessary to eliminate many of the abuses in the credit card industry that trap cardholders with unexpected interest rate changes, or use confusing language that makes it difficult for consumers to make informed and educated decisions in choosing a credit card and how they use it.
The meeting comes as lawmakers in the house began working on a bill for new federal regulations for credit card companies. Following the meeting, the President highlighted the following principles that he would like to see as a final part of the legislation:
- Strong and reliable protection for consumers - protections that ban unfair interest rate increases and forbid abusive fees and penalties.
- All the forms and documents sent from credit card companies to consumers must have plain language in plain sight. No more fine print, no more confusing terms and conditions.
- Requirement that all firms make their contract terms easily accessible and provide consumers with the information they need to go online and do some comparison shopping. It also means that all firms will be required to provide at least one simple, straight-forward credit card that offers the strongest protections along with the simplest terms and prices.
- Increased accountability in the system, so that we can hold those responsible who engage in deceptive practices that hurt families and consumers. This will require beefing up monitoring and enforcement, and also penalties for violating the law.
White House Press Secretary Robert Gibbs said of the behind-closed-doors meeting, "The President discussed the importance of restoring the flow of capital, enabling families to be able to borrow money, as he's talked about before. He wants to see a financial system that is successful and functioning and profitable."
Edward L. Yingling, President and CEO of the American Bankers Association, said in a statement regarding the President's concerns that the executives "listened carefully to those concerns and agreed to work with the Administration to address them."
Yingling said that the executives also discussed the comprehensive new credit card regulations recently adopted by federal regulators that card issuers must adhere to by July 2010. These sweeping new rules were passed last December through an inter-agency effort between the Office of Thrift Supervision (OTS) - a division of the Treasury Department, the National Credit Union Association (NCUA), and the Federal Reserve Board (FRB) to protect consumers from unfair and widespread credit card billing practices. The rules also address sub-prime cards and limits the practice of piling on fees that render a new account virtually useless until the long list of various fees are paid off.
He said that those regulations "directly address many of the many of the issues raised by the officials and by members of Congress" and that card issuers are working hard to implement them.
Yingling added that "the Federal Reserve itself has indicated these rules are likely to shrink credit availability and result in increased rates for some consumers. The goal of any additional efforts should be to achieve the right balance between enhancing consumer protections and ensuring that credit remains available to consumers and small businesses at a reasonable cost."
Using credit is very expensive for many cardholders. Currently, credit card issuers collect approximately $15 billion annually in penalty fees, making up for roughly 10% of credit card issuer revenues. Also, about one-fifth of all credit card users are paying an annual interest rate above 20%.
Some statistics regarding credit card debt as reported by the Federal Reserve:
- Credit card debt has increased by 25% over the past decade and reached $963 billion in January 2009.
- 78% of families have credit cards and 44% carry a balance.
- Of the families that carry a balance, the average amount of credit card debt was $7300 in 2007. (The median balance was $3000.)
- Delinquencies, accounts that are late by 30 days or more, have increased from 3.9% in the fourth quarter of 2006, to 5.6% in the fourth quarter of 2008.