Democrats in Congress want to speed up the Federal Reserve's pro-consumer credit card rules so they take effect this year instead of mid-2010. Those rules would slow interest-rate hikes by requiring 45-day warnings, limit card fees for subprime borrowers, and end "double-cycle" and other compound fees.
Don't rush, says U.S. Rep. Mike Castle, whose Delaware district includes Bank of America's and JPMorgan Chase & Co.'s credit card headquarters in Wilmington. "There's a lot of politics to this," Castle told reporters in a conference call. For banks, "the date is a major issue." He wants "a way the credit card industry can live with this."
"If they have to put it in place too quickly, and they haven't worked out and tested all their models, and they're not confident in what they're doing, it could end up further constricting credit," warned Sandra Braunstein, director of the Federal Reserve's Consumer and Community Affairs division, who joined Castle for the call.
Haven't banks already cut back? We keep hearing from borrowers that card companies are jacking up rates and cutting credit limits. Is that because they're getting ready for the new rules -- or just because they can't sell ("securitize") old credit card loans, to finance new ones, in today's bond markets?
"It is very difficult to say whether part of this is because of the (Fed) rules, versus economic conditions," Braunstein acknowledged? Different agencies still produce different kinds of data for different banks. "There's a lot of piecemeal information," said Castle. I told them it sounds awful tough to make policy from "piecemeal" information instead of hard central data.
Castle's not sure less credit is a bad thing: "We've allowed credit to run away with itself," and some people may just have to get used to borrowing less.