Friday March 14, 2008, 4:08 pm
They came to the nation's capital this week from as far away as Denver, Chicago and Niagara Falls--five people who'd had tough experiences with their credit cards and were asked to share those tales with a House panel. Instead, they ran headfirst into the buzz-saw of Washington politics when the panel's Republicans insisted the visitors allow their lenders to discuss their financial histories publicly--in any forum, at any time.

For four of the five, it was a deal-breaker. Instead of signing the waivers allowing them to testify Thursday, they all sat silently in the audience.

"I didn't want all my ... information out there for just anybody," said Denver's Susan Wones, who saw the interest rate of her JP Morgan Chase card jump from 0 percent to 23 percent in one month last summer, without notification or explanation. "I'm extremely upset I can't talk about this."

Marvin Weatherspoon, a grandfather from Chicago, echoed the tale. "The waiver was very vague," said Weatherspoon, who claims his card rate jumped from 4.25 percent to roughly 25 percent in the wake of one late payment to Bank of America. "It didn’t address the issues we were here to deal with."

The controversy came as members of the House Financial Services Subcommittee on Consumer Credit met to discuss legislation that would add a number of consumer protections to current credit card policy. Among the changes, the bill would prevent card sponsors from applying interest rate hikes to existing balances. It would also require issuers to provide 45 days notice of such hikes, and increase the minimum advance billing requirement from 14 to 25 days.

Bill sponsor Rep. Carolyn Maloney (D-N.Y.) said her proposal will add balance to a market that has grown wildly off-kilter. "The credit card industry has been clear about the responsibility imposed on consumers: make your minimum payments on time and stay under your limit," Maloney said in a statement. "But what about the reciprocal responsibility of card companies?"

The proposal has met considerable opposition from banks and other credit card sponsors, who argue that it would steal their power to set interest rates based on the risk of the individual card holder. Without that option, companies say, rates for everyone would rise, while many borrowers would lose their cards altogether. Most House Republicans have sided with the industry.

"As with any government intervention in the free market," Rep. Spencer Bachus (R-Ala.), ranking member of the Financial Services Committee, said in a statement, "the bill presents a real danger of restricting the range of products and services that credit card issuers currently offer."

Republicans and card sponsors both want Congress to remain on the sidelines while the Federal Reserve applies reform through regulations. Oliver Ireland, a banking consultant with the Washington-based law firm Morrison & Foerster, told lawmakers that regulators will make more precise and appropriate changes than Congress ever could.

But supporters of congressional intervention say the Fed has a history of putting bankers’ interests above those of consumers. "The regulators have been lax in enacting consumer protections, except under the threat of legislation," said Lawrence Ausubel, an economics professor at the University of Maryland.

At Thursday’s hearing, the first panel was to consist of five card holders who had suffered interest rate hikes or unexplained user fees despite a claimed history of responsible borrowing. The GOP waiver requirement came as a surprise, the witnesses said, not least because it surfaced just one day before the hearing. "I didn’t have time to contact a lawyer or anything," Wones said.

In addition, witnesses said they were concerned with the vagueness of the one-sentence waiver language, which offered no limitations on where or when the lenders could discuss their credit histories.

"I think we would have ended up in a banking journal five years from now as a case study," said Steven Autry, of Fredericksburg, Va. "I don’t know."

In 1999, Autry said, he picked up a Capital One card because the 9.9 percent interest rate was advertised as "fixed for life." But last year, without indicating any problems with Autry’s credit, the company hiked his rate to 16.9 percent.

Both Autry and Wones said they were prepared to sign more detailed waivers that wouldn’t give the card companies so much freedom to discuss the witnesses’ finances outside of the hearing, but the committee’s Republican staff refused to compromise. Wones said one GOP staffer "got belligerent and wasn’t happy" with her suggestions to modify the waiver.

The committee’s minority office did not respond to several calls for comment.

The plight of the borrowers—combined with the GOP’s efforts to silence them—have riled a number of House Democrats, some of whom accused the Republicans of protecting the credit card industry at the expense of consumers. Colorado Rep. Mark Udall (D) called Thursday’s removal of the consumer panel "a form of intimidation."

"Susan Wones is not going to put the credit card companies out of business," Udall said at an impromptu gathering after the hearing. "She just wants her story to be told."

Maloney has scheduled a second hearing on the topic for April 9. The New Yorker said she wants to work out a compromise allowing the same consumer witnesses to return.

Meanwhile, those would-be witnesses were openly frustrated with the odd experience surrounding their canceled testimonies—not to mention the partisan animosity that has come to define Washington politics.

"I couldn’t deal with this stress on a daily basis," Wones said. "I’m not sure how anyone does."

Read more about the credit card hearings at U.S. News & World Report, CNN/Money, and MarketWatch.

Friday March 14, 2008, 6:43 pm
Damn! I didn't think my prediction would come true. Bush may be forced to dissolve the Fed.