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ICBA: Congress Must Consider Unintended Consequences of Additional Credit Card Regulation

Washington, D.C. (March 19, 2009)—The Independent Community Bankers of America (ICBA) today urged policymakers not to pass legislation that would add to the significant regulatory burden faced by community banks, potentially limiting their ability to offer competitive credit card products and overdraft protection programs.

Testifying before the House Financial Institutions and Consumer Credit subcommittee, Linda Echard, president and CEO of ICBA Bancard, the payments services subsidiary of ICBA, stressed community bank concerns regarding two pieces of legislation: H.R. 627, the Credit Cardholders' Bill of Rights Act, and H.R. 1456, the Consumer Overdraft Protection Fair Practices Act, two measures sponsored by Rep. Carolyn Maloney (D-NY) designed to curb abusive practices. Click here to view transcript of Linda Echard's testimony.

On the credit card legislation, Echard cautioned that while well-intentioned, the overly restrictive legislation would make it difficult for many community bankers to remain competitive in the credit card marketplace, and urged Congress to instead focus on ensuring transparency and empowering consumers to make informed financial choices. “I have seen first-hand the implications of excessive regulation on small issuers--the costs become too much to justify continuing the program, the card portfolio is sold to a big bank, and consumers in smaller markets are left with fewer choices with less favorable terms,” Echard said.

On the overdraft measure, Echard noted that community banks support ensuring consumers are fully informed about the terms and conditions of any overdraft program and are made fully aware of the choices available to them, but described how the legislation discourages community banks from making these services available to consumers.

Echard noted that if excessive regulatory burdens make it infeasible for many community banks to offer discretionary overdraft protection programs, alternatives such as linking with a savings account or establishing a line-of-credit may not be possible for some customers. “Overdraft programs are not all created equal, a fact which gives community banks the ability to leverage the unique and close relationship they have with their customers to offer them competitively priced programs to best meet their needs.”

ICBA appreciates the leadership of Chairman Luis Gutierrez (D-IL) and the bills’ author, Rep. Maloney (D-NY), in addressing these important issues. Their attention to credit card practices and overdraft programs have caused many of the bad actors in the industry to abandon deceptive practices. ICBA looks forward to working with them to find solutions that allow community banks to continue to offer the products and services their customers have come to expect.

Read the full testimony at www.icba.org.