Rep. Frank eyes bank, card fee hearings

By Jonathan Stempel

WASHINGTON (Reuters) - Congressional lawmakers may hold hearings on how freely banks and credit card lenders may change customers' rates or tack on fees, the new head of the U.S. House Financial Services Committee said on Thursday.

Barney Frank, a Massachusetts Democrat, said cardholders often get inadequate notice that they may incur fees or face higher rates. He also said some charges make no sense, as when a missed payment on one bill triggers a higher rate on another, known as universal default.

"If you look at middle-class America, there are more complaints coming to members of Congress about credit cards," Frank said at the Reuters Regulation Summit in Washington.

"We will not get into the rate-setting business," Frank added. "You may see some regulation as to the ability to change the rate." He said he did not know when hearings might begin.

Floyd Stoner, chief lobbyist for the American Bankers Association, said the trade group recognizes that some disclosures are "quite complicated," but attributes that in part to legal and regulatory requirements.

"There are reasons both for providing overdraft protection and carefully looking at risk associated with credit cards," he said. "We will work with the Congress under the new majority, as we have worked with Congress in the past."

Among big card issuers, Citigroup Inc. (C.N: Quote, Profile, Research, Stock Buzz) and JPMorgan Chase & Co. (JPM.N: Quote, Profile, Research, Stock Buzz) said they look forward to working with Congress and, as JPMorgan spokesman Paul Hartwick put it, "do what's right." The spokesman also said JPMorgan does not use universal default.

Bank of America Corp. (BAC.N: Quote, Profile, Research, Stock Buzz) spokesman Joe Miller said it is premature for the largest card issuer to comment.

Frank had co-sponsored legislation to stop some lending practices in 2005, when Republicans controlled Congress.

Universal default hurts consumers, he said, because "even if you pay your credit card bill regularly, and are never late with it, you may have your rate increase triggered because you and your landlord got into a fight about your rent."

Frank also wants to stop banks from charging overdraft fees, typically $25 or $35, without consent.

Many banks let customers write checks or make automated teller machine withdrawals for amounts in excess of what they have in their accounts, and charge fees for the excess amounts. The Center for Responsible Lending in 2005 estimated this costs checking account customers more than $10.3 billion a year.

"That should be prohibited," Frank said. "Some things are so counterintuitive to people that no matter how loudly and clearly you disclose it, people are going to be fooled."