Schumer Demands Answers From Bernanke at Hearing after Fed Rejects Push to Freeze Rates on Existing Credit Card Balances
Press Release
SCHUMER DEMANDS ANSWERS FROM BERNANKE AT HEARING AFTER FED REJECTS PUSH TO FREEZE RATES ON EXISTING CREDIT CARD BALANCES
Schumer, Dodd Had Written To Bernanke Last Month Urging Rule Banning Retroactive Rate Hikes To Be Enacted Immediately
Senator Calls Fed Decision 'Unconscionable'; Calls Excuse For Not Acting 'Nonsense'
U.S. Senator Charles E. Schumer (D-NY) planned to fiercely quiz Federal Reserve Chairman Ben Bernanke at a Joint Economic Committee hearing Tuesday morning after the Fed rejected a proposal by Schumer and Senate Banking Chairman Christopher Dodd to immediately stop credit card issuers from slapping customers with rate increases on existing balances.
"The Federal Reserve's failure to protect consumers from these outrageous rate increases is unconscionable," Schumer said. "The Fed has acted swiftly to use its emergency powers to steady teetering financial institutions. It is fair to ask why they won't use the same powers to aid American families who are at just as great a risk."
In a letter to Bernanke and other regulators last month, Schumer and Dodd proposed that the Fed speed up implementation of a rule that would ban retroactive rate hikes on existing balances. That rule, already approved by the Fed, is not slated to take effect until July 2010, giving companies more than a year to raise rates on consumers preemptively to get under the deadline. Schumer and Dodd said the Fed should invoke its emergency powers to make the rule effective immediately. Both Senators said they had heard complaints from constituents who have seen their rates double or even triple almost overnight and without explanation.
But in a letter Schumer received late yesterday, the Fed announced it would not speed up the rule's enactment. The Fed stated it was unclear if the rate hikes were in anticipation of the upcoming implementation of these rules or if they were due to bank losses in the current economy. Schumer blasted that logic on Tuesday, noting "under either scenario, the Fed has given the green light to banks to take advantage of American families."
The Senate will be considering a major credit card reform bill later this month. Schumer is a co-sponsor of the legislation.
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