Merkley’s Bid to Rein in Credit Card Practices

When Jeff Merkley went down to Salem, as a junior member of the Oregon House minority, he found there was one subject he couldn’t touch even if he someday happened to become House speaker.

“I tried to write a bill in Oregon,” he remembers, “and was told that states could not legislate on credit cards.”

Now, Merkley is on the U.S. Senate Banking Committee, and nobody can tell him he can’t do credit card legislation — no matter how small the banks make the fine print on the billing.

This week, the Senate takes up the credit card overhaul bill that came out of the Banking Committee, and Merkley has been working it hard. “I’ve been raising it with every senator I talk to,” he said last week, and there seems to be some movement in the bill’s direction.

Last week, he reported, still sounding a little bit stunned by the experience, he went on Fox Business News to talk about the bill, and even that interviewer seemed supportive.

Lately, the idea of doing something about swiftly (but silently) changing credit card rates has been drawing more interest than a two-day-late Visa payment. It’s widely thought that credit card companies, often banks, are dealing with other revenue shortfalls by seeking to pump up returns from their credit card business — including maximizing their anytime, any reason, any amount interest rate-increase option. (It’s in the language.)

Recently, the House overwhelmingly passed an overhaul bill, 357-70 — a bill that largely matches new rules the Federal Reserve plans to put in place in the middle of next year. Rep. Carolyn Maloney, D-N.Y., sponsor of the House bill, says President Barack Obama told her he hopes to sign a credit card bill by Memorial Day.

The bill from the Senate Banking Committee is both tougher than the House bill and would take effect sooner. Among other changes, it would stop the companies from arbitrarily raising rates, from using delinquencies on other bills and changes in overall credit scores as a reason to raise rates and from charging interest on fees.

This policy, points out Merkley, gives the companies lots of opportunities.

“If an individual calls up and inquires about a new source of credit, his score goes down,” he notes. “From a company unilaterally reducing your credit limit, your score goes down.”

Companies also have a lot of late payment leeway.

“You can pay on time,” says Merkley, “and they can sit on your payment and not post it until you’re late,” and the next sound you hear is your interest rate rising.

This week should start to show just what might happen in the Senate. The bill, Merkley points out, would require 60 votes twice — once for the Senate to proceed on it, and again to actually pass it.