Are Consumers Banking on Congress?

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Every year millions of consumers complain about unfair credit practices. Practices that under current law the U.S. government allows. It is a subject that has many asking, why?

From rising credit card interest rates to subprime mortgage loans -- consumers are getting fed up with a system that seems to favor the banking industry at their expense.

Click play to watch CBN News producer Charlene Israel's report and Pat Robertson's analysis afterwards.

"Where's no rhyme or reason to it," said Susan Wones, a credit card customer who saw her card rate rise. "They make me feel like I was guilty of something like I had done something wrong and I was embarrassed to tell my friends about this."

"I thought I signed a fixed rate mortgage," said Nettie McGee, a victim of a subprime mortgage loan. "I had no idea my rate would jump almost 25 percent."

Many financial experts agree that in recent years the playing field between creditors and borrowers has become very one-sided. And it is often times the average American who ends up with the short end of the stick.

"The credit card industry can change the rules at any time," explained Ed Mierzwinski of the Federation of State Public Interest Research Groups. "They can raise your interest rate up to 36% APR or more even if you have had a perfect record with them. We're trying to stop these practices."

Consumer groups blame the federal government saying Congress has dragged its feet in protecting consumers.

"Credit card companies get away with gouging consumers, because there are no regulators that care and Congress has dropped the ball about protecting the public from their unfair practices," Mierzwinski told CBN News.

These practices, Mierzwinski says, are fueled by well-coordinated and powerful lobbyists who push Congress to vote in favor of banks.

" The American Bankers Association is a powerful lobby that coordinates and gives the banks their access to Capitol Hill," Mierzwinski said. "the ABA is the lobby to all the big and small banks and the associations have political action committees and they make massive campaign contributions to Congress."

And just how much influence do they have on Capitol Hill?

"Congress is heavily influenced by the number of bank lobbyists and the amount of contributions that they make," Mierzwinski explained. "It may not buy votes, but it buys access and it makes it harder for us to advance the causes of average Americans."

However, the credit tide may be slowly changing.

Some lawmakers have threatened banks with tighter regulation surrounding credit-card fees and policies.

"It's a contract between the card holder and the card company but now it is very one-sided," said Rep. Carolyn Maloney D-New York. "The credit card company gets to make all of the decisions."

Bankers are defending their actions. Gregory Baer works for Bank of America.

"A higher interest rate not only allows us to earn income to compensate risks, but it can actually reduce risk we are already managing," Baer responded.

There is also pending legislation that would force lenders to take a much closer look at the borrower's ability pay back their mortgage or other loans.

While consumer advocates are encouraged by this and other consumer friendly legislation, they admit the credit battle is far from over.

"There have been more hearings just in the last year than there have been in the last ten years on unfair credit card practices," Mierzwinski said. "But so far we don't have enough votes. We don't have enough co sponsors of the reform legislation so that Congress will step forward and send the law to the President."

*Original broadcast April 7, 2008.

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CBN News
Charlene Israel

Charlene Israel

CBN News

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