Colo. group says credit card reform will cost consumers

DENVER - Legislation backed by President Barack Obama that would end abusive credit card practices would increase the cost of credit for everyone, said the head of the Colorado Banking Association.

Obama, appearing at a high school in New Mexico, lobbied Congress from afar to make it harder for credit card companies to hike interest rates precipitously, charge unfair late fees, or impose other impossible conditions on consumers.

"Those days are over," he said.

"This is America and we don't begrudge a company's success when that success is based on honest dealings with consumers," Obama said. "We need reform to restore some sense of balance."

With Obama demanding a bill on his desk by Memorial Day, the House has approved legislation containing some of the protections Obama seeks. A slightly different version is pending in the Senate, where a vote could come as early as this week.

Both measures would ban interest rate increases on previous balances in most cases, and require that customers be given 45 days notice before their rates are hiked. The bills also would deter companies from giving a credit card to minors.

"We happen to disagree with the policy, but if that's what Congress decides, we'll live with it," said Don Childears, president of the Colorado Banking Association. "It effectively bans risk-based pricing."

"If you liken it to car insurance, you can't charge the reckless driver the full cost of what it costs to insure him so you've capped it," said Childears. "Those costs get passed on to all the other drivers."

Obama's call for reform was met with enthusiasm by Kirk Axelson, the owner of Precision Drapery in Denver.

"Credit card companies were great at giving me credit," said Axelson, who said he had an interest rate jump from 4.9 percent to 42 percent on a $39,000 balance.

"I could've gotten mad and angry, but that doesn't do no good," said Axelson, who worked with Money Management International to set up a debt repayment plan.

Axelson says he will be debt-free in four years and estimated he will save about $100,000.

Money Management International has recently merged with Consumer Credit Counseling Services (CCCS), which has offices in Denver.

CCCS announced Thursday it received a $7,500 grant from the JPMorgan Chase Foundation to hold a series of financial literacy workshops in and around Denver.

CCCS plans to hold 24 financial education workshops over the next 10 months. CCCS says they will focus on budgeting, the use of credit and basic banking skills.

For more information, visit http://www.cccsdenver.org/ or call 1-866-889-9347.