President Obama is speaking out again against the practices of credit card companies, asking the Senate to have something that will protect consumers in his hands to sign by Memorial Day. He said this weekend about the documented credit card abuses, “It is past time for rules that are fair and transparent. Instead of an ‘anything goes’ approach, we need strong and reliable protections for consumers.”

Obama is referring to companies who are contacting customers to inform them of unannounced rate hikes or even account closures for cardholders who aren’t actively using credit cards. After years and even decades of credit card companies trying to get their cards in to as many consumer pockets as possible, they are suddenly seeing every cardholder as a major default risk in this recession. With credit card defaults expected to increase over the next 12-18 months, companies are doing what they can now to reduce their risk.

This behavior from credit card companies can make life very difficult for borrowers in an already difficult economy. Increasing rates can make monthly payments a much bigger burden for borrowers and decrease the likelihood of borrowers paying down balances in the long run. Cutting available lines of credit can hurt the credit scores of borrowers, as I have discussed in this blog in the past.

The recession has made conditions tough for everyone. President Obama seems most unhappy with the timing of these abusive credit card practices. In his radio address this weekend, he said, “Americans know that they have a responsibility to live within their means and pay what they owe. But they also have a right to not get ripped off. Abuses in our credit card industry have only multiplied in the midst of this recession, when Americans can least afford to bear an extra burden.”

Lawmakers say that they are closing in on agreeing to terms that will provide more fairness for borrowers. There are already legal provisions in place to protect borrowers that are set to become law in June of 2010, but a solution is needed much sooner to protect borrowers during this critical period of time in the economy.

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Tags: consumers, credit card, protect, Rates

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