Obama meets with credit card executives, promises reform

President Barack Obama called his Thursday meeting with top executives from the nation's largest credit card companies "constructive," and then he said he would do what he could to change the way those companies do business.

"We had a discussion with some of the top issuers here, and what I communicated to them is that I think credit cards are an important convenience for a lot of people ... so we want to preserve the credit card market," Obama said. "But we also want to do so in a way that eliminates some of the abuses and some of the problems that a lot of people are familiar with--people finding themselves starting off with a low rate and the next thing they know their interest rates have doubled; fees that they didn't know about that are suddenly tacked on to their bills; a whole lack of clarity and transparency in terms of the terms and conditions of their credit cards."

The White House will work with leaders in Congress who have already introduced credit card reform legislation, the president said. On Wednesday a House committee approved a bill that would limit credit card rates and fees. A Senate committee approved similar legislation a few weeks before.

Obama set out four points which his administration would work to change:

1. "I think that there has to be strong and reliable protections for consumers -- protections that ban unfair rate increases and forbid abusive fees and penalties.  The days of any time, any reason rate hikes and late fee traps have to end."
2. "All the forms and statements that credit card companies send out have to be written in plain language and be in plain sight.  No more fine print, no more confusing terms and conditions.  We want clarity and transparency from here on out."
3. "We have to make sure that people can comparison shop when it comes to credit cards without being afraid that they're going to be taken advantage of.  So we believe that it's important to require firms to make all their contract terms easily accessible online in a fashion that allows people to shop for the best deal for their needs."
4. "We think we need more accountability in the system.  And that means more effective oversight and more effective enforcement so that people who are issuing credit cards but violate law, they will feel the full weight of the law."

Learn more from Consumer Reports about credit card rates that jump overnight.

And, learn the dark secrets of debit cards.

States give consumers more protection

Iowa moves ahead on consumer rights bill
Iowa would join every other state in allowing consumers to individually sue companies for fraud under the state consumer protection law. But the bill is criticized for too many exemptions: insurance companies, banks, lawyers, cable TV providers, doctors, veterinarians and architects.The governor still must sign the measure.
Des Moines Register

Now, how do you pay for college?
The Illinois state treasurer is trying to recoup money parents had invested in a state-sponsored college savings program. One investment option lost $85 million last year.
CBS 2 Chicago

New Jersey plan would require greater notice on debt
A bill in the New Jersey General Assembly would require debt collection agencies in the state to provide debtors with additional information about their accounts, a copy of the Fair Debt Collection Practices Act and would increase fines per violation to at least $10,000.
InsideARM

Consumers fighting back over debt

As the economy puts more people in financial trouble, debt collection tactics are getting a tougher look.  Here’s what’s happening around the country:

Debt collectors sued in Houston
Consumers are increasingly fighting back by suing those who use illegal tactics. In Houston, U.S. District Court statistics show lawsuits filed against debt collectors under a federal consumer protection law are up 60 percent in the first quarter of this year, compared to last year. (Houston Chronicle)

Consumers get help in Oregon
A blog from Oregon notes that a new state consumer law allows the state’s Attorney General to investigate debt collectors' methods and sue over use abusive practices. (The Oregonian)

Feds getting into the act
Michelle Singletary has a column on the Federal Trade Commission’s effort to change how companies collect past-due obligations. (Washington Post)

How to avoid financial traps
In March 2009, Consumer Reports provided advice about how you could sidestep some of the problems  posed by debt consolidation offers.

Actual U.S. savings rate may have hit 6% in February

BusinessWeek is reporting that the actual savings rate for most Americans may have risen to 6.4% in February, a significant rise from last year when the savings rate hovered near zero.

The official statistics from the Bureau of Economic Analysis show that personal spending fell by 0.4%, and that the savings rate rose to 4.2%. Those figures, however treat as spending fixed costs like healthcare and education over which consumers have little control. With those categories removed, it appears that "pocketbook spending" fell by 3.1%, and that the savings rate hit 6.4%.

The savings rate has historically hovered near zero as Americans borrowed more than they earned.

Obama expresses support for flood victims as Republicans criticize the budget

In his weekly address, President Obama expressed his support for the people affected by the flooding in the Northwest and pledged to provide federal assistance.

Snow and rain have conspired to raise the Red River in North Dakota to its highest recorded level, 40.67 feet. Officials are concerned that levies and dikes will be ineffective if the river rises above 43 feet.

Several thousand people in Fargo and neighboring Moorehead have already been evacuated, including prison inmates and hospital patients.

In response, the President this week declared a major disaster area in North Dakota and Minnesota, and dispatched to the area the acting head of the Federal Emergency Management Agency, Nancy Ward.

"I will continue to monitor the situation carefully," the President vowed. "We will do what must be done to help in concert with state and local agencies and non-profit organizations – and volunteers who are doing so much to aid the response effort."

The President commended the volunteers who helped to fill sandbags and reinforce the levies, calling their assistance "integral to our response."

"In facing sudden crises or more stubborn challenges," Obama said, "the truth is we are all in this together – as neighbors and fellow citizens."

The President added that he was looking forward to signing the Public Service bill that recently cleared both the House and Senate.

The Republican address this week was delivered by the ranking member of the Senate Budget Committee, Judd Gregg. Republicans have struggled in the past weeks to adequately describe their opposition to the budget, resorting mostly to criticisms that the spending plan is too large and too expensive.

"You may have heard this before," Gregg acknowledged, "that the budget of the President spends too much, taxes too much and borrows too much." Gregg maintained that the budget triple the size of the national debt while levying "the largest tax increase in history, much of it aimed at taxing small business people."

"These are staggering numbers," he said, "and represent an extraordinary move of our government to the left."

The Senator specifically opposed the President's energy plans and efforts to limit the private sector's influence over the health care sector.

"If you do not spend too much, if you do not tax too much, if you do not borrow too much," he concluded, "we can leave our children a better nation where they will have even greater opportunity for prosperity, peace and freedom."

Congressional hearings tackle consumer credit issues

More and more of us having trouble paying the bills--whether they're from the mortgage, credit cards, or car loans--and it doesn't look like there is a bailout in store for individual consumers. But all of our tough times being talked about in Washington.

Today two Congressional hearings tackled the problems consumers are having in this recession. A House subcommittee examined "Consumer Credit and Debt: The Role of the Federal Trade Commission in Protecting the Public,” while a Senate subcommittee took on “Abusive Credit Card Practices and Bankruptcy.”

The head of the FTC told the House Subcommittee on Commerce, Trade, and Consumer Protection that his agency is trying to protect regular folks, but it needs more funding and more authority.

"The agency has used its traditional consumer protection tools of law enforcement, broad-based research and policy development, and consumer and business outreach to provide important protections for consumers of financial services," FTC Chairman Jon Leibowitz said. "However, the Commission must do more. To enable the FTC to perform a greater and more effective role protecting consumers, it recommends changes in the law and resources to enhance its authority to promulgate needed rules, prosecute cases against law violators, and conduct critical research. If given more authority, the Commission certainly will use it to protect consumers."

The Senate hearing focused on one area of personal finance over which the FTC chief said his agency had very little authority: credit cards.

Senators on the Judiciary Subcommittee on Administrative Oversight and the Courts heard about how credit card companies--some of which have taken billion-dollar bailouts from the government--are treating their customers.

"The standard credit card agreement gives the lender the power to bleed their customer through evolving and ever more crafty trick and traps," Sen. Sheldon Whitehouse said. "Under this business model, the lender focuses on squeezing out as much revenue as possible in penalty rates and fees, pushing the customer closer and closer to the edge of bankruptcy."

Whitehouse is sponsoring legislation that would limit interest rates that credit card companies can charge consumers who are in bankruptcy proceedings.

The proposal would change bankruptcy laws to dissolve claims for repayment of debt carrying interest over a certain level, now 18.5 percent, according to the Associated Press. It could affect millions of dollars in claims made by credit card companies from consumers who have filed for bankruptcy protection.

CBO: Obama's budget could push federal defecit to $1.8 trillion in 2009

If all the president's budget proposals were to be enacted and the economy continued to struggle, the nation's deficit would climb well beyond what the White House had previously projected, according to a new analysis from the Congressional Budget Office.

The deficit estimate for 2009 would total $1.8 trillion, or 13.1 percent of GDP, the nonpartisan CBO estimated, with another $1.4 trillion of debt the next year.

President Obama's budget initiatives, if enacted, would add an estimated $4.8 trillion to the nation's deficit between 2010-2019, the CBO report said.

That's a lot more than the numbers put out by the White House. The CBO wrote in its report:

Our estimates of deficits under the President’s budget exceed those anticipated by the Administration by $2.3 trillion over the 2010-2019 period.  The differences arise largely because of differing projections of baseline revenues and outlays. CBO’s projection of baseline deficits exceeds the Administration’s estimate (prepared on a comparable basis) by $1.6 trillion.

By comparison, if current laws were maintained, the 2009 deficit would be an estimated $1.7 trillion, and the 2010 deficit would be $1.1 trillion. Even those lower numbers would be the largest deficits as a share of GDP since 1945, the CBO said.

The CBO's estimate of overall economic conditions did not offer particularly cheerful news either.

Despite the steps already taken by the White House and the Treasury, "the economy is likely to continue to deteriorate for some time," the CBO report said.

The recession may technically end by the fall, but:

For the next two years, CBO anticipates that economic output will average about 7 percent below its potential—the output that would be produced if the economy’s resources were fully employed. That shortfall is comparable with the one that occurred during the recession of 1981 and 1982 and will persist for significantly longer—making the current recession the most severe since World War II. In this forecast, the unemployment rate peaks at 9.4 percent in late 2009 and early 2010 and remains above 7.0 percent through the end of 2011. With a large and sustained output gap, inflation is expected to be very low during the next several years.

Financial responsibility, the theme park ride

Now that we find our economy in shambles--with mountains of credit card debt, mortgages that can't be paid off, and a very low personal saving rate--many people have decided that we all need lessons in financial responsibility, particularly for younger generations.

Two unlikely bedfellows have volunteered to teach some of those lessons. The investment firm T. Rowe Price and entertainment giant Disney announced plans to open "The Great Piggy Bank Adventure" exhibit at Disney's Epcot Theme Park.

"This interactive exhibit will bring basic saving and investing concepts to life in a fun and captivating way," T. Rowe Price's news release said. "The experience will entertain and empower families, while encouraging them to engage in regular dialogue about the importance of saving and how to manage money responsibly."

The company says the exhibit will focus on "four key financial themes":

• setting goals
• saving and spending smartly
• staying ahead of inflation
• diversifying your investments

There's one more lesson about money the exhibit can teach kids: nothing is free. One day tickets for Walt Disney World sell for $75 for adults and $63 dollars for kids under 10, meaning a family of four would have to pay $276 just to get inside.

"The Great Piggy Bank Adventure" is scheduled to open this spring at INNOVENTIONS at Epcot at the Walt Disney World Resort in Florida.

Administration moves to reduce the cost of small business loans

The Administration is expected tomorrow to unveil a plan to aid small businesses by unfreezing the credit market to reduce the cost of business loans. Congressional Republicans have complained that the Administration's recovery plans primarily helped the financial service and not small business owners.

The Administration will direct $730 million from the economic stimulus package to raise from 85% to 90% the government's guarantee on Small Business Administration loans under $150,000. The government will also eliminate common fees and processing charges that lenders pass on to borrowers, which can add up to 3.75 percent to the cost of a loan.

The Administration aims to unfreeze the credit markets by spending up to $20 billion to buy up loans from primary bank lenders. This in turn should allow the primary lenders to make new loans to other small business owners.

The Small Business Administration usually guarantees loans worth $20 billion each year, however new lending is on track to fall below $10 billion this year, according to Administration officials.

Speaking today on Meet the Press Christina Romer, the Council of Economic Advisors said, "We know that small businesses are the engine of growth in the economy, and we absolutely want to do things to help them... We’ve talked to a lot of small business owners, and one of the trouble they’re having is just community banks don’t want to lend to them because the secondary market in SBA loans has virtually disappeared. So one of the things we’ll be announcing is a program to get that market cleared and working again."

Minority whip Eric Cantor agreed this morning on Meet the Press that government action can unfreeze the markets. "I think the crux of the issue is the only credit markets that are working, by and large, are the credit markets where the government has stepped in to guarantee the issuance of the debt," he said.

The President is expected to announce the new measures tomorrow from the White House with Treasury Secretary Timothy Geithner.

Obama reassures China that U.S. debt is a sound investment

President Obama today reassured China and other world lenders that their investments in American debt were safe and secure.

“Not just the Chinese government," Obama said, "but every investor can have absolute confidence in the soundness of investments in the United States.”

China's prime minister, Wen Jiabao, yesterday questioned whether China's extensive investment in the United States' debts were safe. China is by far the largest holder of U.S. debt.

At the end of last year, China held Treasury Securities worth almost $730 billion. Including bonds, recent debt purchases, and other investments, it's estimated that China has close to $1 trillion invested in the United States.

Were China to sell its Treasury holdings, the value of the dollar would fall, making it more difficult for both consumers to afford Chinese exports and for the government to finance the public debt through borrowing.

“There’s a reason why even in the midst of this economic crisis, you’ve seen actual increases in investment flows here into the United States,” Obama said. “I think it’s a recognition that the stability not only of our economic system but our political system is extraordinary.”

The comments came after the President met with Brazilian president, Luiz Inácio Lula da Silva.