Senate lawmakers heard testimony Thursday about how credit card marketing and fees. Consumer advocates called on Congress to reign in what they termed abusive lending practices, while industry representatives defended their practices.
At the hearing, members of the Senate Committee on Banking got an earful from witnesses, including Harvard law professor Elizabeth Warren. She declared that, "quite simply, the credit-card market is broken."
Warren told lawmakers that credit-card issuers earned roughly $79 billion last year from interest charges and late fees. She likened the fees to a hidden tax on card holders.
"The credit card companies are imposing a huge tax [on consumers]. And for the 23 million of those Americans who are making only the minimum monthly payments, and sometimes not that, the tricks and traps keep them on the financial ropes… never quite getting back on their feet," Warren testified.
But representatives from the credit-card industry denied they target vulnerable consumers. Richard Vague, the CEO of Barclays Bank, said it wouldn't make business sense.
"The vast majority of credit card holders use credit cards responsibly. Its in nobody's interest to provide credit cards to consumers who cannot repay the money they borrowed," Vague told the senators. "For that reason, we, and all other issuers, strive to provide to provide credit cards only to consumers who can handle the credit offered to them."
The banking committee hearing came just as the Government Accountability Office noted a steep rise in the number of consumers paying double-digit interest rates on their credit cards.
The hearing also signaled a shift in tone on the part of Congress, where the new Democratic majority has promised a series of hearings on how the industry markets credit cards to consumers.