Last fall, a group of credit card companies asked Lawrence Summers for a sit-down, with the goal of “educating” the incoming Obama administration about their much-maligned industry.
Now it looks like they’ll be the ones getting schooled.
The CEOs from Visa, Mastercard, American Express and the credit card divisions at about a dozen of the largest banks will get their meeting Thursday, but it will be at the White House, and President Barack Obama and Treasury Secretary Timothy Geithner will join Summers as not-so-happy hosts.
On the Sunday show circuit last weekend, Summers made it clear that the administration wants to talk with the companies about high fees and predatory lending practices.
“If you are the chairman of Citibank, you don’t want your card guy going in there, because you know, having been there, that the companies will get the s—- beat out of them by the president and Summers,” a Republican credit card lobbyist told POLITICO. “You don’t meet with the president to talk about substance. You do that with lower-level guys at the Fed or Treasury — not with Geithner and Summers.”
The meeting is particularly ill-timed for the card industry. On Wednesday, the House Financial Services Committee approved legislation cracking down on credit card billing practices, frequently derided as abusive by consumer advocates. A bill has also passed the Senate Banking Committee but faces a tougher fight on the floor.
Industry representatives are trying to paint a happy face on Thursday’s meeting. “We hope it involves a constructive dialogue about the various complex issues that are involved here,” said Ken Clayton, managing director of credit card policy for the American Bankers Association.
A White House spokeswoman confirmed that the meeting was originally proposed by some banks. “As part of our ongoing outreach to the business community, we decided to expand the group to make the meeting as productive as possible,” said Jen Psaki in an e-mail to POLITICO.
But bashing the credit card industry is Politics 101 for a Ph.D.-level White House.
Consumer outrage about credit cards is at an all-time high. So are delinquencies, which hit 5.56 percent in the fourth quarter of 2008. That’s a 60 percent jump since 2005, according to the Federal Reserve.
And then there are the fears that credit card defaults could be the next financial storm to hit already struggling consumers.
Even some of the industry’s longtime allies on Capitol Hill admit that change is coming.
“Most of the banks realize that some of what they’ve done before — the processes being followed — don’t really look very good in the light of day,” said Sen. Tom Carper (D-Del.), whose state is home base for a large number of credit card firms.
What remains unclear is whether Obama will throw enough political capital behind the issue to get a bill passed into law.
Conventional wisdom is that any credit card reform bill would have a hard time reaching the 60-vote threshold needed to overcome a filibuster threat in the Senate. Republicans would most likely stand united in voting against it, as would two Democrats from states with a heavy credit card company presence: Carper and Sen. Tim Johnson of South Dakota.
There are signs that the political dynamics are shifting. Carper said he is open to a compromise bill, as did Sen. Bob Corker (R-Tenn.), who sits on the Senate Banking Committee.
The House Financial Services Committee approved credit card reform legislation Wednesday, and the bill is expected to pass the House easily as early as next week.
The House would largely codify into law new rules authored by Rep. Carolyn Maloney and approved by the Federal Reserve last year but not scheduled to take effect until July 2010. The House bill wouldn’t kick in much sooner, but Maloney won an amendment that speeds up the start date for a provision requiring card companies to provide consumers with a 45-day notice before they hike interest rates. Under Maloney’s amendment, the companies would be required to give 90 days’ notice.
“The dynamic and the politics have changed dramatically” from last year when the effort died in the Senate, Maloney told POLITICO.
Sen. Chris Dodd (D-Conn.), chairman of the Senate Banking Committee, has introduced legislation that goes further than Maloney’s bill. He pushed the bill through committee without a single Republican vote.
Dodd said he moved the bill despite the deep divide in order to get the issue moving, but he plans to work with his committee to find a compromise that could pass the full Senate.
At least one of the Republican on the Banking Committee thinks that’s a realistic goal.
“There are some areas where there is significant agreement,” Corker said. Corker — who has two daughters in college — cited bipartisan support for limits on the marketing of credit cards to students.
He said that the Senate could pass a bill if senators focus on the areas of agreement. But he warned that Dodd’s bill is too partisan in its current form.
A White House push could help tip the scales for the bill.
“If [the president] calls for this to be acted upon, I think that will give it great boost,” said Sen. Carl Levin (D-Mich.), who’s held multiple hearings investigating predatory credit card practices. “I think if this is brought up, there’d be a good chance that we can get 60 votes, even more.”
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