What do you think? Leave a respectful comment.

The video for this story is not available, but you can still read the transcript below.
No image

Senate Examines Credit Card Industry Practices

The credit card industry and its practices, including interest rates and other fees, came under scrutiny at Senate hearings Wednesday. A Washington Post reporter details the hearings.

Read the Full Transcript

  • JEFFREY BROWN:

    Last year, Americans used more than 600 million credit cards to buy more than $1.8 trillion in goods and services. Today, the average American family has more than $9,000 in credit card debt.

    And with the continuing increase in the use of credit cards, the amount of debt, and the number of personal bankruptcies, lawmakers are taking a closer look at the practices of the highly profitable credit card industry.

    Among the policies under scrutiny: so-called universal default, where interest rates on one credit card are raised because a customer fails to pay another credit card bill on time; over-the-credit-limit fees charged to customers who are over their limit; and charging interest on an entire credit card balance, even when customers have made timely payments.

    Yesterday, executives of three major banks were called before a Senate subcommittee to defend those policies. Sen. Carl Levin is calling for ending some practices and requiring clearer disclosure of credit card rules for consumers.

    SEN. CARL LEVIN (D), Michigan: I don't believe that the average consumer understands it, believes it, thinks it's fair, and I don't either.

  • JEFFREY BROWN:

    Norm Coleman, the panel's top Republican, agreed.

    SEN. NORM COLEMAN (R), Minnesota: Industry has gone too far, pushed too far, and needs to clean up its act.

  • JEFFREY BROWN:

    In one example, Ohio resident Wesley Wannemacher testified that he was charged more than $7,000 in interest charges and late fees for $3,200 in purchases he'd made with a Chase credit card.

    WESLEY WANNEMACHER, Witness to Congressional Hearing: It feels like every month you take one step forward, but two steps back, you watch that 30 percent and the other fees just continue to grow your balance. It's a feeling similar to riding in a submarine, when the water pressure is really high, and every time the phone would ring, it gets hard to breathe, and you're not sure whether you should even answer it or not.

  • JEFFREY BROWN:

    Richard Srednicki, the CEO of Chase Card Services, apologized to Wannemacher.

  • RICHARD SREDNICKI, Chase Card Services:

    In this case, we simply blew it. Our politics and procedures failed, and we deeply regret it.

  • JEFFREY BROWN:

    Chase has forgiven the remainder of Wannemacher's debt and said it would no longer charge over-the-credit-limit fees. Citigroup, the country's largest financial institution, also announced it, too, would eliminate some interest rate increases.

  • VIKRAM ATAL, Citigroup Inc.:

    These changes redefine our relationship with every single one of our customers.

  • JEFFREY BROWN:

    The problem of credit card debt, already familiar in many American homes, is now the subject of "Maxed Out," a new documentary that opens tomorrow in a number of cities around the country.

The Latest