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August 27, 2004
THE 2004 CAMPAIGN: THE DEMOCRATIC PLATFORM; Kerry Sees Credit Card Abuses, And Promises Steps to End Them
By LOUIS UCHITELLE
Senator John Kerry added a plank to his platform yesterday, promising to push for legislation that would curb what his campaign describes as abusive practices in credit card and mortgage lending.
The proposals coincided with the announcement of new Census Bureau data showing that family and household income, adjusted for inflation, had fallen over the first three years of the Bush administration. The decline came as consumer debt rose, and the new plank promised relief for wage earners in straitened circumstances.
''Abusive lending practices can take a huge bite out of the incomes of families who are working and can barely pay their credit card bills,'' Robert Gordon, Mr. Kerry's director of domestic policy, said.
Companies that issue credit cards, mainly banks, often double the interest rates if a cardholder is late with a monthly payment or the holder's creditworthiness is challenged. Mr. Kerry would require notice before each rate increase and limit the increase to a few percentage points.
''There is no proportionality now in these increases,'' Gene Sperling, an economic adviser to Mr. Kerry, said. ''They can go from 8 to 28 percent.''
A Kerry administration ''would ask Congress to legislate standards and to direct the Federal Trade Commission and bank regulators to impose regulations consistent with those standards,'' Mr. Sperling said. Much of this would be achieved through amendments to the Truth in Lending Act, he and Mr. Gordon said.
Credit card lenders would also be required to disclose, in prominent type on bills, how long it would take to pay off a debt, and the cost in interest if the card holder made only minimum monthly payments.
A California law imposed this standard, but credit card issuers challenged it in court in 2002, and the Bush administration's Office of the Comptroller of the Currency sided with the issuers. The comptroller argued that only federal regulators could impose such a restriction on nationally chartered banks and that his office did not plan to do so. The state lost the case.
Mr. Gordon said that some minimum payments were so low that they barely kept up with interest costs or fell behind them, in which case the balance could never be repaid.
Other changes proposed by the Kerry campaign would require lenders to forgo penalty charges when they allowed card holders to go beyond their borrowing caps. A cardholder with a $5,000 credit limit, for example, can face a penalty for reaching $5,200 even if the card company approved the charge that put the total over $5,000.
Mr. Kerry's principal mortgage proposal would prohibit lenders from using balloon mortgages in most subprime loans, which often go to low-income people at higher rates.
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