Follow the money. This may be good advice for anyone wondering why it is that the credit card industry has continued to run unchecked over consumers the past several years. Although there has been talk of creating laws and rules to rein in some of the most egregious industry practices, little has actually been done to date. A hearing today in the House of Representatives on a proposed “Credit Cardholders’ Bill of Rights” may change that, but there’s a lot of talk on one side of the argument, and a lot of money on the other.
The cynics out there (I admit, I’m one of them) might wonder why so little has been done to curb an industry that touches so many American lives. The answer: follow the money.
The Associated Press and other media outlets have been faithfully reporting on public records filed with the U.S. Senate public records office. They haven’t been page 1 news headlines, but little snippets here and there about lobbying efforts at different government agencies and cash going to Congress. Lobbyists are required by law to disclose attempts to influence the executive or legislative branches of government.
American Express spent $3.3 million in 2007 — $2 million of that during the second half of the year — lobbying Congress, the Federal Reserve system (which regulates credit card issuers), the Executive Office of the President, the Treasury Department and different government agencies. Not all of the money was spent on credit card issues. AmEx also lobbied on small business support, anti-Internet spyware legislation and blocking online child pornography, according to the AP.
Capital One weighed in with $1.2 million in ’07 lobbying expenses on “legislation forcing lenders to provide notice of interest rate increases, blocking lenders from charging certain kinds of fees and forcing lenders to warn borrowers of the consequences of only making the minimum payments on their bills,” the AP writes.
Another credit card issuer, Advanta Corp., reportedly spent $643,000 on lobbying efforts in 2007. The AP notes that $332,000 of that cash was spent in the second half of the year “to lobby Congress on legislation related to credit card practices and transaction fees.”
Discover Financial Services, which issues Discover credit cards, reported $400,000 in lobbying expenses during the second half of 2007.
It’s not against the law to give money to elected officials. It’s how our system works. When I read about the lobbying expenses I’m reminded of Kevin Hamilton’s impassioned letter to the Federal Reserve in October 2007.
The Richmond, Va., man was one of hundreds of consumers who filed comments with the Fed regarding the need for changes to the Truth in Lending Law and Regulation Z (which governs disclosure of terms in open-ended loans such as credit card accounts). Hamilton writes:
“It is clear that competition has not been working in the credit card industry as terms have become more onerous, fraud has increased, and the quality of customer service has noticeably deteriorated. It is time for the regulators to step in and aid consumers, whose voices have largely gone unheard in the proposal for Regulation Z.”
He adds: “I beg of you, please start thinking about those of us who do not have access to huge, powerful lobbies. We are sick and tired of being abused by companies we do business with.”
You know the old saying about how money talks and that other stuff, well, it walks? Let’s see if any laws are changed for the better this year.
See related: “Fed backs rules to curb deceptive credit card practices,” “Voices: What they’re saying about Regulation Z“