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NEWS RELEASE
May 19, 2009
ABA Media Contact: Peter Garuccio
(202) 663-5452
E-mail: pgarucci@aba.com
ABA STATEMENT ON SENATE PASSAGE OF H.R. 627
by Edward L. Yingling, president and CEO, American Bankers Association
“The ABA has been actively engaged with key members of Congress and the Administration in trying to develop legislation that provides consumer protections while avoiding provisions that would undermine the availability of credit to consumers and small businesses. While the Senate-passed bill (H.R. 627) contains a number of provisions that are tough, but workable, it also, unfortunately, contains some provisions that will undermine the availability of credit.
“Credit cards are a strong economic driver and are relied upon by consumers and small businesses to make payments and to bridge short-term financial gaps. The goal in the legislation should be to obtain the right balance: providing protections, while maintaining the important role of credit cards in providing loans to consumers and small businesses. Unfortunately, we believe the bill does not achieve that balance and will therefore cause an unnecessary decrease in credit availability.
“Most importantly, this bill fundamentally changes the entire business model of credit cards by restricting the ability to price credit for risk. What has been a short-term revolving unsecured loan will now become a medium-term unsecured loan, which is significantly more risky. It is a fundamental rule of lending that an increase in risk means that less credit will be available and that the credit that is available will often have a higher interest rate. While the recent Federal Reserve rule also contained restrictions on pricing card credit for risk, this bill goes much further in this and other areas. We are concerned that the Senate bill will have a dramatic impact on the ability of consumers, students, and small businesses to obtain and use credit cards.
“The credit card companies fully understand the real concerns Congress and the Federal Reserve are trying to address. As we go forward with strong new rules, we will continue to work with Congress and the Administration to try to achieve the right balance so that credit needed for our economy is available on terms that are fully understood by, and fair to, consumers.”
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For an explanation of how the business model may change, click here.
The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation's banking industry and strengthen America’s economy and communities. Its members – the majority of which are banks with less than $125 million in assets – represent over 95 percent of the industry’s $13.6 trillion in assets and employ over 2 million men and women.
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