Congress takes interest in credit card fees
KAI RYSSDAL: There were two interesting reports out from the Federal Reserve today. The central bank released what’s commonly called the beige book — after the color of its cover. The regional survey of the U.S. economy showed exactly what chairman Ben Bernanke’s been saying — moderate growth in most places. And the Fed issued its consumer credit report. We owe a combined $2.4 trillion as of the end of January, not counting mortgages.
A good part of that debt’s on credit cards. And at a congressional hearing in Washington today, executives from some of the biggest credit card companies found themselves on the defensive over their fees and interest rates. Our Washington bureau chief John Dimsdale reports.
JOHN DIMSDALE: Take the case of Wesley Wannemacher of Lima, Ohio. He used a new Chase credit card in 2001 to run up $3,200 in expenses — mostly for his wedding. After some health problems, he soon became overwhelmed with fees, penalties and interest rates nearing 30 percent. Over the next six years, he paid $7,500, and still owed more than $4,000 when he contacted the Senate Committee on Investigations.
WESLEY WANNEMACHER: It feels like every month, you take one step forward but two steps back. You watch that 30 percent and the other fees just continue to grow your balance.
After the committee came calling, Chase wiped Wannemacher’s bill clean. And at today’s hearing, CEO Richard Srednicki apologized.
RICHARD SREDNICKI: We have policies and procedures in place at Chase to identify customers like him who have fallen into deep financial trouble and are finding it difficult to work their way out. In this case, we simply blew it.
Banks defend their credit card fees as fair compensation for the lending risks they take. But consumer groups complain fees, late charges and interest rate adjustments are not clearly disclosed. And Republican Senator John Warner of Virginia warned credit card issuers that government regulations are in the offing.
JOHN WARNER: Congress is going to police this thing pretty severely. Clean it up.
That could include caps on fees, limits on interest rates and better disclosure of the real costs of using a credit card.
In Washington, I’m John Dimsdale for Marketplace.
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