WASHINGTON — The Obama administration is seeking a handful of changes to credit card legislation the House plans to take up next week that would toughen consumer protections.
The provisions are expected to be discussed Thursday when bankers from the largest issuers and representatives from the card networks gather at the White House for a meeting on credit card issues.
According to several sources, the administration wants to force card issuers to get their customers permission before charging them a fee for exceeding their credit limit. That provision is tougher than one in the card reform bill by Rep. Carloyn Maloney, D-N.Y., which would require companies to give customers a chance to opt-out before charging such fees. The Maloney bill passed the House Financial Services Committee on Wednesday.
The administration also wants to add a requirement that banks must apply payments first to balances with the highest interest rate. Under the Maloney bill, card companies are allowed to apply payments proportionally across balances with different rates.
The administration is also seeking to require card companies to disclose on monthly statements how long it would take to pay off a balance when making only minimum payments and highlighting how much more the consumer would pay in fees and interest when doing so, sources said. Currently, the Maloney bill requires issuers to provide a toll-free number and a website so that consumers can find out how to pay off their balance.
The administration wants to require any low-interest teaser rate to be offered for at least six months and standardize bill due dates so they are the same every month.
The administration is also seeking further reforms to subprime credit cards. Both the Maloney bill and regulations due to go into effect next year by the Federal Reserve Board and other regulators limit fee rates associated with such cards.
The Obama administration is prepared to give the card industry one change it had sought. The administration is suggesting the bill limit consumers ability to run up charges before a higher annual percentage rate goes into effect. Under the Maloney bill, there are only a few exceptions that let issuers increase rates on existing balances, such as when a teaser rate expires.
The administration is proposing to cut in half the 14 days the Maloney bill would require between notice and rate changes. That change would put the bill in line with regulations from the Fed that would allow card companies to raise rates after 7 days.