A renewed effort by the Obama administration to rein in card practices and a planned White House meeting Thursday with top issuers appear to be geared more toward winning a relatively easy political victory and helping a critical ally than fundamentally reshaping the card industry.
Any legislation enacted by Congress is still expected to largely resemble federal regulations scheduled to go into effect next year, with tweaks and an aim to speed implementation.
But a publicized White House meeting and added pressure on card companies to support a bill give the administration a chance to take a hard line on a financial issue after enduring plenty of heat for helping bankers.
The effort also allows the administration to help Senate Banking Committee Chairman Chris Dodd, whose faces longer odds of winning re-election next year and has made card reform a top priority. His card bill has yet to win wide support from fellow Democrats and is likely to stall unless changes are made.
"I don't think we are going to see substantive changes coming out of this," said Brian Gardner, an analyst with KBW's Keefe, Bruyette & Woods "It's a good political issue to get out in front of. I think they need to be seen as doing something. "
Both the House and Senate are working on legislation that would essentially give the force of law to and expand upon regulations from the Federal Reserve Board and other regulators set to go into effect in July of next year.
The House Financial Services Committee is scheduled to vote today on a bill, and the Senate Banking Committee approved a bill by a vote of 12 to 11 on March 31. Both the regulations and the bills would ban double-cycle billing, universal default and prolonged payment periods. The bills also would limit fees and provide extra protections for younger borrowers, along with some other modifications.
Though the bills are not much tougher than the Fed rules, the banking industry has continued to oppose them, arguing that the central bank's restrictions go too far already.
The heart of the congressional effort appears designed to speed up implementation of the rules. The House bill would make the rules effective a year after enactment or June 30, 2010, whichever came first. The Senate bill would give card issuers nine months.
The banking industry argues it needs until mid-2010 to update its systems to comply with the new requirements.
So far the administration has indicated few specific goals for Thursday's meeting with representatives from 15 of the largest credit card issuers and networks, though there is speculation it could pressure the industry to support legislation.
"There are a couple of different goals," White House Press Secretary Robert Gibbs told reporters Monday. "This is all part of an agenda to... take a look directly at some of these practices and make it a little bit more honest and a little bit more fair."
Industry representatives argue that most of those concerns have already been blunted by the Fed rules. "A lot of what the administration and others have expressed as concerns have been dealt with a very thoughtful and deliberative Fed process," said Ken Clayton, the senior vice president of card policy for the American Bankers Association.
But consumer groups continue to say more is needed.
"The Fed rules do little to combat excessive fees, which have exploded in recent years and have become a hidden, back-end way of padding prices," said Lauren K. Sanders, managing attorney at the National Consumer Law Center. "The Senate bill goes farther." (The regulators proposed changes to the rules Tuesday to make clear that they apply to all institutions, including retail companies, that offer deferred interest programs on their card products. Comments are due in 30 days.)
The only new element the administration has thrown into the debate is a card rating system.
In a press conference this week, Gibbs referenced Obama's support on the campaign trail for a credit card bill of rights that would include a rating system designed to ban certain fees, prevent consumers from being trapped in unsustainable interest rates and improve disclosure of terms to make them transparent and simple to understand.
Industry representatives said Tuesday they hoped to use the White House meeting to explain the economic conditions behind why credit is contracting and rates are increasing. "The point of it is to have a frank exchange of views about the economy and the role of credit cards in the current recession, as well as from the industry's side the importance of at-risk pricing," said Scott Talbott, executive vice president of the Financial Services Roundtable.
Some card lobbyists acknowledged privately that with the political climate so hostile to bankers, especially for those that accepted Troubled Asset Relief Program funds, a face-to-face meeting with a very popular president intensifies the pressure to cooperate.
The meeting is likely an easy way for the administration to score political points if it helps pass a bill, even if it does not go much further than Fed regulations. Obama and lawmakers can tout the legislation back home as a way they helped rein in the banking sector, which is blamed for the financial crisis.
But some industry observers said the administration's policy is contradictory. "This is a difficult meeting for the administration, because if the administration goes out there and pushes aggressively for people to lend and not raise rates and pushes for credit card protections, they're pushing in two directions at the same time," said Oliver Ireland, a partner at Morrison & Foerster. "You've got to decide what you want."
The White House's involvement also appears designed to boost Dodd, who is down in the polls and has been touting his card legislation. Last week Obama pledged to help Dodd.
"I can't say it any clearer: I will be helping Chris Dodd, because he deserves the help," the president told The Boston Globe.
Dodd's card bill is stuck in the Senate right now. Sen. Tim Johnson, D-S.D., voted against the measure, and it has failed to win Republican support. Democratic leaders needs near uniform support from their own side and at least a few Republican defectors to guarantee passage.
After the Banking Committee vote, Dodd said he would need to compromise to solidify passage of the bill. But Obama's spotlight on the issue could also help by encouraging wavering senators to support the measure.
"It will put a spotlight on the Dodd bill, which helps generate attention and support for his bill, here in Washington as well as at home," Talbott said.