Senate Comes Down on Credit Card Issuers' Practices

The Senate participated in a massive pile-on against the credit card industry Wednesday, compelling the beleaguered market segment to change their practices regarding late fees and penalties.  According to the Senate, it is these practices that are keeping Americans in debt.

"By nickel and diming tens of millions of consumer accounts, credit card issuers reap large profits," said Sen. Carl Levin, D-Mich., chairman of the Permanent Subcommittee on Investigations.

"It is clear that credit card issuers charge interest and fees in ways that produce enormous profit," Levin said.  This seems obvious, of course; businesses generally are in business to make money.  Credit card offerers are no different.  However, the Senate perceived a relentless pursuit of profit that seemingly put millions of Americans in financial jeopardy.

"The exorbitant interest rates and multiple fees charged to already overburdened consumers are breaking the proverbial backs of American families," Alys Cohen, a staff attorney at the National Consumer Law Center, told <i>MarketWatch</i>.

Credit card companies have seen the writing on the wall.  Many of them, prior to the public Senate spanking, have instituted policy change in regards to fees and penalties.  Levin said in a briefing Tuesday that he wants to be "supportive" of any credit card legislation coming out of the Banking Committee. Just the prospect of legislation, he said, could prove to be a "pressure point" to spur voluntary industry changes.

"Congress is going to police this thing pretty carefully," said Sen. John Warner, R-Va., adding that credit cards are "vital" to the U.S. economy.