Whitehouse: Obama’s New Consumer Financial Protection Agency is a Step Forward for Rhode Islanders Caught in Credit Traps
Washington, D.C. - President Obama's new plan to toughen federal regulation of financial products like mortgages, credit cards, and retirement accounts will help level the playing field for Rhode Islanders like Ryan Kamphuis, who saw his interest rate skyrocket when he paid one bill late after having been hospitalized for weeks, U.S. Senator Sheldon Whitehouse (D-RI) said today.
The White House this week announced a comprehensive regulatory reform plan that includes the creation of a new federal entity, the Consumer Financial Protection Agency, to oversee consumer financial products, such as subprime mortgages and high-interest credit cards, the abuse of which contributed to the current financial crisis,. The agency's mission would be to strengthen protections against unfair lending practices and ensure that information about financial products is transparent, simple, and easy to understand.
"President Obama's plan will help make sure banks and credit card companies play it straight," said Whitehouse, who has cosponsored the Financial Product Safety Commission Act of 2009 (S. 566), legislation to create such an agency. "Rhode Islanders like Ryan Kamphuis deserve no less."
Whitehouse is the author of two measures to encourage lower interest rates and require banks to abide by tougher state laws against abusive lending practices. At a roundtable discussion at the John Hope Settlement House earlier this month, he talked with Kamphuis, of East Greenwich, and several other Rhode Islanders about the impact of high interest rates and other credit card tricks and traps on their families and businesses.
Kamphuis was told his 29.99 percent interest rate would return to normal after six months of consistent, on-time payments - but after six months, the bank refused to lower his payments. "The answer I ultimately got from Bank of America is, ‘we don't have to so we aren't going to,'" he said.
Felice Fleury of Tiverton, who owns a drywall and plastering business, received notices that her family's credit card rates would go from 7.90 percent to 19.99 percent, and from 8.90 percent to 24.99 percent, even though they never missed a payment in sixteen years and always paid more than the minimum. Bill Floriani, from North Providence, also saw his interest rates go up from 12 percent to 25 percent on one card, and from 9 percent to 17 percent on another, though he had never paid late or missed a payment.
Doug Corey, of North Scituate, described seeing the interest rate on his credit card more than double, from 12.74 percent to 28.99 percent, after two months in which he paid less than the minimum. "I have never missed an auto loan or a mortgage payment and I have a good credit score," he wrote Whitehouse in an e-mail message. "This is now all on the brink of being lost." In March, at Whitehouse's invitation, Corey testified about his experience before a hearing of the Senate Judiciary Subcommittee on Administrative Oversight and the Courts.
The White House plan builds on a new credit card reform law, enacted in May, to prohibit abusive practices that keep many Americans like these four Rhode Islanders in a "sweatbox" of mounting debt. Whitehouse cosponsored that legislation, and has separately introduced two other measures to crack down on unfair credit practices: the Consumer Credit Fairness Act (S. 257) would provide incentives for credit companies to keep interest rates reasonable; and the Empowering States' Right to Protect Consumers Act of 2009 (S. 255) would restore to each state the ability to protect its citizens from unscrupulous lenders based in other states.
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