Just in time for the Christmas (or other holiday) shopping season, Congressman Anthony Weiner, Democrat of New York, issued a press release and held a press conference to announce the results of a study he conducted "warning shoppers of the exceedingly high interest rates on retail store credit cards, which can have interest rates as high as 28.99% -- nearly double the average credit card."
Topping Mr. Weiner's list of what his press release called "the Top 5 Worst Retail Store Cards" were Radio Shack, with a 28.99% interest rate; Best Buy and Staples with a 27.99% rate, and Home Depot, with a 25.99% rate.
What Mr. Weiner's press release omitted was that the Radio Shack, Staples, and Home Depot cards — three of Mr. Weiner's four "worst" — are all issued by Citibank. (The Best Buy card is an HSBC product.)
At least two points are worth making here.
The first is that President Obama has been running around claiming credit for passing laws protecting consumers from the predations of the rapacious credit card industry. Mr. Obama did so back on May 22, 2009, when he signed the "Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009," proclaiming, "With this new law, consumers will have the strong and reliable protections they deserve." A White House fact sheet at the time boasted that the law "bans unfair rate increases." And he did so again on July 21, 2010, when he claimed,
for all those Americans who are wondering what Wall Street reform means for you, here's what you can expect. If you've ever applied for a credit card, a student loan, or a mortgage, you know the feeling of signing your name to pages of barely understandable fine print. What often happens as a result is that many Americans are caught by hidden fees and penalties, or saddled with loans they can't afford. That's what happened to Robin Fox, hit with a massive rate increase on her credit card balance even though she paid her bills on time. .... Well, with this law, unfair rate hikes, like the one that hit Robin, will end for good.
Even after President Obama hailed the passage of not one but two laws providing "strong and reliable protections" to prevent Americans from "loans they can't afford" or other "unfair rate hikes" of credit card companies, the card companies are still charging consumers 28% or 29% a year in interest at a time when the banks' own cost of money, thanks to Federal Reserve policies, is approximately 0%. Is President Obama hyping consumer protections that don't actually protect consumers?
The second point is that the U.S. government still owns at least 7% of Citigroup. Treasury Secretary Timothy Geithner is going around bragging that "taxpayers are likely to receive an impressive return (totaling tens of billions) on the investments made under the TARP." That return, in the case of Citigroup, if it occurs, is going to be won in part by charging some pretty high interest rates to customers of Radio Shack, Staples, and Home Depot.
I don't know what the default rates are for these cards. Maybe the default rates are so high that Citi is losing money on the cards even with the interest rates at the 28% and 29% levels. And as a general matter, I think banks should be allowed to charge customers whatever rates the customers are willing to pay. No one is forcing anyone to use any of these cards, and customers have plenty of choices of other cards. But a principled free-market approach to bank regulation is one thing. For the government to demonize the credit card companies as rapacious and claim credit for passing laws protecting consumers from them, while at the same time owning a bank that is charging card customers high rates from which the customers are actually not protected is something else entirely. It'd be a good topic for a Weiner press conference.
