Credit Card Companies Deserve No Mercy

President Barack Obama's ambitious economic recovery agenda is decidedly short in a crucial area: Consumers on the brink of losing their homes have heard plenty of sympathy, but they have received no real relief — at least on a scale that would help rescue the hundreds of thousands of homeowners slipping toward foreclosure.

But the president promises swift action to rein in credit card companies run amok. The action cannot come too quickly and new restrictions cannot be too tough on this unrepentant sector of the financial services industry.

Last month, the Senate voted down legislation that offered the only realistic tool to reverse the nation's tidal wave of foreclosures: granting bankruptcy courts power to reduce — or "cram down" — home mortgage debt.

The mortgage lending industry has proven decisively that it has no interest in helping to clean up the huge mess it helped create. It has refused the across-the-board loan modifications needed to bring immediate relief to homeowners. And it has the upper hand because of a special exemption under the bankruptcy code that strips judges of power to reduce mortgage loans.

The Senate had the chance to put a hammer in judges' hands, but it refused. As Sen. Dick Durbin, D-Illinois, put it, the banks "own the place."

But the reality, too, is that. Obama did not push hard — a disappointment sure to doom countless homeowners to foreclosures that might have been prevented had the legislation passed.

Obama pledges to do better with credit card abuse — another "financial service" that's been extended recklessly and administered unscrupulously.

How have the major credit card companies reacted? By jacking up fees and interest rates on an ever larger pool of credit card customers — some by as much as 10 percent — including on consumers who never have missed or had a late a payment. The credit card companies know reform is at hand and want to soak customers to the greatest extent possible before the party ends.

Obama called credit card executives to the White House to push them to reform their practices. He devoted a recent weekly radio address to the topic — urging Congress to make legislation a top priority so that he will have bill to sign by Memorial Day.

Legislation already has passed in the House that, among other things, would limit credit card companies' power to arbitrarily raise rates, require that they give customers 45 days warning before raising interest or fees, extend grace periods for payments and protect college students and teens from predatory industry marketing practices.

The Senate promises an even tougher approach, such as stricter controls on rate increases and putting the kibosh on "double cycle" billing practices that permit companies to charge extra interest on balances that have been paid on time.

Obama has yet to prove his consumer protection credentials. Credit card reform would be a start. The sooner and tougher, the better.

REPRINTED FROM THE ST. LOUIS POST-DISPATCH.

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