Yesterday Treasury Secretary Tim Geithner along with Congresswoman Carolyn Maloney (D-NY)  met with consumer groups, civil rights leaders and the credit card consumers to discuss the national need for credit card reform.

The discussion centered on the House Bill Credit Card Holders Bill of Rights of 2009 (HR 627), which reportedly is about to be passed today. If enacted, this bill would significantly strengthen consumer protections in the credit card market.

"Over the past three months, the Obama Administration has aggressively worked to get our credit markets flowing, get our economy back on track and get Americans back to work," said Geithner. "We have also begun laying the groundwork, through regulatory reform, to ensure that a crisis of this magnitude never happens again and that responsible consumers and investors are protected. That includes creating a more stable, more effective and more consumer-friendly credit card market -- one that protects our taxpayers."

Unfair credit lending practices has led to consumers paying around $15 billion in penalty fees. This represents a problem in a major industry like credit cards. The U.S. treasury estimated that close to 80% of American families have a credit card, and 44% of families carry a balance on their credit cards. New measures to strengthen consumer protection in the credit card market would be a first step toward improving disclosures and ending unfair practices.

The new regulations call for protections that ban unfair rate increases and forbid abusive fees and penalties. Second, all the forms and statements that credit card companies send out have to have plain language that is in plain sight. Third, firms will be required to make all their contract terms easily accessible and giving consumers the information they need to go online and do some comparison shopping. It also means requiring firms to offer at least one simple, straightforward credit card that offers the strongest protections along with the simplest terms and prices.

The regulations will also call for more accountability in the system, so that those who do engage in deceptive practices that hurt families and consumers can be held accountable. To do that, the government plans to "beef-up" monitoring and enforcement, and also penalties for any violations of the law.

However, securitization market experts say that the new regulations may restrict lending. For the securitization market, limiting a credit card company's ability to price in borrower risks may actually work against the government programs created to reopen lending, such as the Term Asset-Backed Securities Loan Facility. A concern is that these reforms are likely to result in lower revenues for credit card issuers, which are already feeling the brunt of the financial crisis.


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