REASON 46: Obama signed legislation to protect consumers from the predatory lending practices of credit card companies.
I’d like to focus on a specific piece of legislation Obama signed in his first four years that I believe reflects quite clearly upon his character as a leader who deserves a second term: The Credit Card Accountability, Responsibility, and Disclosure Act of 2009, or the Credit CARD Act.
In a nutshell, this bill protects consumers. It bans unfair rate increases (whoops, your interest rate is now 49 percent!) and unfair fee traps (whoops, did we mention your payment was due on a different day this month?). It requires fine print be in legible English rather than lawyerly gibberish, and it requires said fine print be easily accessible on the internet instead of only in the weird brochures everyone throws away. It curbs the marketing of credit cards directly to students—I like to call this the “Joe The Camel Memorial Provision, Or, What Did I Do With That Free Sweatshirt, Anyway?”—and best of all, it eliminates the dreaded double-billing cycle.
Why do these things matter so much? Well, 80 percent of American families have a credit card, and 44 percent carry a balance; average credit card debt is close to $5,000 nationwide, and $15,000 among indebted households. While some people may have run up their balance buying those nefarious big screen TVs, a recent study by the Consumer Federation of America and the Certified Financial Planner Board of Standards states that 38 percent of Americans—myself included—live paycheck to paycheck, making a line of credit essential for navigating emergencies and bridging the gap between what we make and what we need, hoping, always hoping, to catch up someday.
Unfortunately, to paraphrase Elizabeth Warren, the system was rigged against us.
The history of the credit card is fascinating, and I didn’t know much about it until I started researching. A few special moments stand out: Like how when the first general purpose credit cards started to appear in the late ‘50s, banks would simply mail them to people. None of this namby-pamby “you’re pre-qualified!” letter nonsense that keeps the U.S. Postal Service in business these days. They would just send the damn thing out, and you could go spend money you didn’t have, right then and there. Yikes.
I also never really understood why so many credit cards came from Delaware and South Dakota until I learned that those states elected to trash their usury laws in the 1980s, eliminating any cap on interest rates in order to attract much needed jobs from the card-issuing corporations. “Usury” is a fun word to look up on the internet: While money lending has existed since the dawn of society, it seems the practice of charging interest has a long history of condemnation in many cultures, and who can forget that whole Jesus/temple/money changer business? He got real pissed at the dudes who were running up hidden fees and charging poor people exorbitant interest, and if Jesus doesn’t like it, chances are it’s probably wrong.
But these are modern times, and banks have to do whatever it takes in order to stay ahead of inflation if they wanna make a buck. Many of these profit-driven activities were given the splendid moniker of “predatory lending practices,” and, for whatever reason (and despite the word “predatory” being right there in the name), they were accepted as part of the game. Jacking up interest rates to crazy percentages is a pretty easy way to grow profits. So is coming up with convoluted, ever-fluctuating fee policies designed to intentionally take advantage of people who don’t read the fine print.
Look: No one reads the fine print. No one ever has. But taking advantage of people, in general, is usually frowned upon. So why has it taken so long for someone to put an end to it, at least in this arena? Best as I can figure, it has something to do with 1) the immense power wielded over our political process by the well-heeled men and women of the financial services industry and 2) some sort of ingrained belief that anyone who gets themselves into debt in the first place probably deserves what’s coming to them.
If you will, a personal story.
Despite my long history as a bleeding-heart, tree-hugging liberal, I am also the daughter of a proud fiscal Republican, and I grew up with a clear understanding of financial responsibility. After my first teenaged automobile “incident”—T-boning another (completely stationary) car in my own driveway at 16—I was taught very quickly that the way you pay off your debts is by getting a job, and working your ass off until those debts are paid.
That lesson did not help me whatsoever with the real world. I got into severe credit card debt immediately after graduating from college in 1996. I worked my ass off. And it still took me 15 years to get out.
Much of that struggle was thanks to an artistically low income coupled with an insistence on living in New York City, but a good portion of it had to do with all the months I spent making minimum payments that barely covered the accrued interest from the previous month. I didn’t read the fine print and my rates ballooned. I missed payments and faced impossible fees. I took advantage of gifts and discounts and bonus points and lots of other shiny things the nice people gave me when I opened a new line of credit, all of which bit me in the ass. Every provision in the Credit CARD Act of 2009 would have directly improved my life had it been in place during those years, and I am so thankful on behalf of the people whose lives it is improving now.
Credit is supposed to be part of a safety net, one that catches us when we fall. Far too often in recent years, people have found themselves dropping through that net, landing beneath it, and looking up to find that it’s almost impossible to climb back on top. I empathize with how trapped they feel; I lived my own version of it, and I swore I’d never go back... until this summer, when I faced both an emergency room visit and a broken-down car, and I suddenly rejoined the ranks of the indebted. Thanks in part to the actions of President Obama and his first term administration, however, I know there’s far less chance I’ll stay there this time. The Credit CARD Act was real change that gives me hope, and I suspect there’s more where that came from. I’m looking forward to it. I hope you'll join me.
Los Angeles, California