Pre-recess Dem clampdown on credit card firms rushed

Democrats in the House and Senate are racing this week to move legislation clamping down on credit card companies before they head home for recess to face constituents who have lashed out at bailouts for the financial industry.

The Senate Banking Committee and House Financial Services Committee will both mark up consumer-friendly bills that would restrict fees and penalties and the ability of card companies to hike interest rates.

{mosads}Consumer advocates have long pushed for stronger regulation of the industry, but they have met with stiff resistance from the financial industry as a whole and have not had much luck in Congress.

As lawmakers embark on a massive rewrite of financial rules this year, however, advocates are emboldened in their efforts. The banking industry, meanwhile, is trying to dissuade lawmakers from overreaching.

“My guess is that both chambers will be able to move the process forward, but we’re hopeful that a dialogue will continue to see if there is a way to adjust these things in a more balanced manner,” said Kenneth Clayton, senior vice president for credit card policy at the American Bankers Association. The industry says that the congressional bills would hurt consumers by restricting the availability of credit.

The congressional action follows new credit card rules that the Federal Reserve announced in December aimed at increasing transparency and restricting firms from raising rates to boost penalty fees.

But those rules won’t go into effect until July 2010, which consumer advocates say is too late.

“Most consumers said that an effective date of July 2010 is just too long,” said Pam Banks of the Consumers Union.

In the House, Rep. Carolyn Maloney (D-N.Y.) has introduced a bill that would put the Fed’s rules into effect three months after the bill is signed into law and would allow retroactive increase in rates only if a consumer is more than a month late on a payment. The Financial Services Committee will mark up the bill on Wednesday.

On Tuesday, lawmakers will mark up a bill introduced by Sen. Chris Dodd (D-Conn.) that would attempt to further rein in the industry by prohibiting “any time, any reason” increases in interest rates.

Dodd’s bill is expected to take effect nine months after it is signed into law. Sens. Charles Schumer (D-N.Y.) and Mark Udall (D-Colo.) have also offered a bill clamping down on credit card companies.

The industry is concerned that the House and Senate measures would uproot the changes made by the Fed and would “force the Fed to re-propose those rules and industry to go back and re-craft its implementation,” Clayton said.

Meanwhile, on Monday, lobbyists for the Merchant Payments Coalition announced an effort to target eight members of the Financial Services Committee to rein in “interchange fees,” or the fee banks charge merchants for  credit card purchases. The coalition began a “six-figure” ad buy targeting Reps. Shelley Moore Capito (R-W.Va.), Travis Childers (D-Miss.), Bill Foster (D-Ill.), Jim Gerlach (R-Pa.), Jim Himes (D-Conn.), Paul Hodes (D-N.H.), Dan Maffei (D-N.Y.) and Walt Minnick (D-Idaho).

{mospagebreak}The coalition has targeted the House Judiciary Committee in the past, but members of the coalition said they’re focused on Financial Services lawmakers, and junior members in particular.

“It’s important that we can appeal to people who still have an open mind and have the ear of the chairman,” said Hank Armour, head of the National Association of Convenience Stores. The Electronic Payments Coalition, representing financial industry, opposes the campaign.

{mosads}The full House is set to vote on a bill on Wednesday that is a milder rebuke on executive compensation policies than a tax measure that has lost steam in the Senate. The new bill, which is the latest effort to respond to the public outcry surrounding the bonuses at insurance firm AIG, would allow bonuses and compensation payments at bailed-out firms, unless the Treasury secretary says they are “unreasonable or excessive.” The bill would apply to existing or future contracts.

In the Senate, manufacturers and drug companies have their eyes on the Judiciary Committee, which was scheduled to mark up the patent reform bill on Tuesday.

Companies like AstraZeneca, Dupont and Procter & Gamble sent letters Monday to a number of senators from their home states who sit on the Judiciary panel.

Sen. Arlen Specter (R-Pa.), the committee’s ranking member, Sen. Dianne Feinstein (D-Calif.), Sen. Russ Feingold (D-Wis.) and others all received letters from company executives back home expressing their concern over the bill.

Opposition to the legislation seems to be more tightly organized than it was in the last Congress, with unions more strident and green tech companies now joining the fight. The AFL-CIO, along with other labor groups, has already sent a harsh letter to lawmakers about the bill, and a number of green tech companies have spoken out forcefully as well.

Those opposed to the bill worry a provision that would reduce damages from patent lawsuits could force companies to invest outside of the United States. Without a strong patent system protecting their products, manufacturers and others would move jobs elsewhere.

The tech industry, including Hewlett-Packard and other Silicon Valley giants, considers the bill among its biggest legislative priorities this Congress. Tech lobbyists argue that without reform of the nation’s patent system, their client companies will continue to be hampered by expensive, frivolous litigation that will stifle their scientists and engineers from innovating and inventing.