The New York Times: The Credit Card Squeeze and Toward Fair Lending
The New York Times opined about our issues on both Saturday and Sunday this weekend. Both times, we really liked what they had to say.
Here’s an excerpt from Saturday’s editorial, “Toward Fair Lending,” which addresses H.R. 1728, the Mortgage Reform and Anti-Predatory Lending Act:
When the Senate comes up with its version [of mortgage reform legislation]… it should correct weaknesses in the one passed by the House.
The House bill, for example, provides only a slap on the wrist to lenders that violate the law. It also coddles Wall Street companies — which encourage unscrupulous lending by buying up risky loans — by limiting the conditions under which they can be sued by borrowers.
The way to discourage irresponsible lending is to hold liable both the mortgage originators and the companies to which they sell their sometimes illegal loans. The risk of being hauled into court would make secondary investors more careful and build accountability into the securitization system.
The House bill also fails to address the problem of federal regulations that pre-empt state laws that may impose stronger penalties and remedies. Federal regulations should be a floor, not a ceiling, in lending. Millions of Americans have lost their homes, neighborhoods have been destroyed and the country’s financial system has been brought to the very brink of disaster. Does Congress really need to know more before it finally fixes these rules?
Both bills require adequate advance notice of rate increases or changes in terms. Both make it far harder for students to get credit cards and for banks to increase rates on existing balances. Both end the practice of charging interest on balances already paid. The House bill would give banks a year to deal with these new rules; the Senate would give them nine months. That is already too long for many customers.
Fed Chairman Ben Bernanke argues that banks need the extra year to adjust. Senator Charles Schumer, a Democrat from New York, says the Fed’s leisurely timetable is “unconscionable.” He should make this same point with his Senate colleagues in order to make the new law go into effect much sooner.
From the looks of it, the banks are ratcheting up fees and interest before the Fed’s rules kick in and it is too late. This makes an earlier deadline imperative.