Some Fees are More Equal Than Others -- Senate Investigates Credit Cards

U.S. Senate Committee on Homeland Security and Governmental Affairs, Permanent Subcommittee on Investigations held hearings yesterday on the topic "Credit Card Practices: Fees, Interest Rates, and Grace Periods."

Prepared statements from Chairman Carl Levin (D-MI) and ranking minority member Norm Coleman (R-MN) are posted as well as the testimony from the head honchos of Bank of America, Citibank and Chase. The bankers' prepared remarks are pretty standard and pretty boring. Their unscripted remarks, according to news reports, were more forth coming, with the bankers apologizing for most abusive practices and promising to mend their ways.

Much more interesting is the report of Alys Cohen, Staff Attorney at the National Consumer Law Center. The NCLC has documented a number of real world examples which show how bank junk fees, penalty rates, universal default and late payment triggers constitute unfair and abusive practices. For us lawyers, there are lots of good case cites and quotes. My favorite has to be from Perry v. FleetBoston Financial Corp. The court described a bank's ability to change the rules at will as placing consumers in "an Orwellian nightmare, trapped in agreements that can be amended unilaterally in ways they never envisioned." This court went on to
say that it was

reminded of George Orwell's 1946 work, Animal Farm, in which the pigs assume power and change the terms of the animals' social contract, reducing the original Seven Commandments, which included ‘All animals are equal,’ to one—‘All animals are equal, but some animals are more equal than others.’

The incomprehensible nature of credit card disclosures was also challenged. Senator Coleman stated:

After wading through that morass, it should come as no surprise to learn that the Government Accountability Office recently reported that disclosures are sometimes written at a “twenty-seventh-grade level.” I can only assume that one would need – after twelve years of grade school and four years of college – a 4-year medical degree, a 5-year PhD, and a 2-year MBA to fully grasp those particular provisions.

Just don't fund that education on your credit card!