US presidential nominee Barack Obama has spoken out
against what he sees as the predatory lending practices of credit
card companies, accusing them of employing “unfair and deceptive
practices to trick Americans into signing agreements they can’t

As part of his ‘Change That Works for You’ tour that will see
him reach out to electoral hotspots to discuss economic issues with
the hope of securing supporters, Obama recently held a roundtable
talk in Chicago with a group of consumers who claim to have been
financially mauled by the credit card industry.

One idea the presidential hopeful is floating is reinstating
government regulation of credit card interest rates. The government
has not been involved in interest rate regulation for 30 years,
after a Supreme Court ruling effectively blocked states from
engaging in the practice.

Obama was joined at the roundtable by Elizabeth Warren, a
Harvard law professor and one of the country’s foremost advocates
for the re-regulation of credit card interest rates.

A worsening US economy

According to Obama, the worsening economic condition in the US
is forcing US consumers to spend more and more on their credit
cards. “Over the past 15 years, average household credit card debt
has tripled,” he said.

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“The typical family is now nearly $10,000 in the red. And
bankruptcy rates have steadily climbed over the past year. Now,
let’s be honest. Part of why our debt crisis is so bad is that some
folks are making reckless decisions – racking up big credit card
bills by purchasing flat-screen TVs and other luxury goods they
know they can’t afford. And they should have to face the
consequences of those decisions.

“But many more Americans aren’t falling into debt because they
made an irresponsible decision; they’re falling into debt because
credit card companies are pushing them over the edge… The contracts
you sign when you get a card have gone from being one-page long a
few decades ago to more than 30-pages long today.

“And they are often filled with traps and fine print only a
credit card executive could understand. These companies have been
crossing the line to boost their bottom line.”

Moreover, Obama is quick to point out Washington has failed to
clamp down on this type of predatory lending, citing that lobbyists
for the credit card industry have been actively getting “laws
written to their liking”.

“We cannot let the rules of the game continue to be rigged
against ordinary Americans,” Obama added.

This element of his campaign is at odds with rival Republican
nominee John McCain, who has also come under fire from Obama for
refusing to tackle the credit card industry and its lending
practices. He noted McCain opposed a bill in 2005 that would have
required credit card companies to inform borrowers on their monthly
statements that making only a minimum payment would increase the
amount of interest paid and the time it would take to pay off the
full balance.

“John McCain has been part of the problem not part of the
solution,” said Obama. “When he had the chance to help families
avoid falling into debt, John McCain sided with the credit card
companies. When I fought against the credit card industry’s
bankruptcy bill that made it harder for working families to climb
out of debt, he supported it – and he even opposed exempting
families who were only in bankruptcy because of medical expenses
they couldn’t pay.”

A cornerstone of the Obama campaign

As early as November 2007, there were clear signs the issue of
credit card lending was to become a cornerstone in the Obama
campaign. Late last year, he announced his Credit Card Bill Of
Rights, making it clear he wants to ban the practice of ‘universal
defaults’, where a credit card company raises the interest rate on
someone who has made every payment on time but who has a problem or
late payment with a different creditor. He is also looking to
prohibit transaction fees as well as interest rate hikes on
accumulated debt.

“If a credit card company wants to raise interest rates, then
that new, higher rate should apply to the debt you add going
forward, not what you already owe,” he said. “The store can’t
change the price of what you bought after you bought it and neither
should your credit card.”

Obama is also proposing to create a five-star rating system for
credit cards that would see the Federal Trade Commission calculate
the degree to which credit cards meet consumer-friendly standards.
A card’s rating would ultimately depend on measures such as the
spread between the card’s introductory rate and the maximum rate

“That way, Americans can compare credit card companies and avoid
those stacking the deck against them,” Obama argued.

Truong Mellor