Consumer Bill of Rights: Privacy Not Included

The Credit Cardholders’ Bill of Rights is pending in the House of Representatives now. But when subcommittee hearings were held recently, consumer privacy was apparently not high on the subcommittee’s agenda. That’s a sad commentary on how legislation gets marked-up these days.

On March 13, the Subcommittee heard testimony from learned academics like Elizabeth Warren and Katherine Porter. It heard testimony from representatives of Capital One, Bank of America and JP Morgan Chase. Conspicuously absent: Real people.

It’s not that they weren’t invited — they were. But when they got to Congress, they found out the Democrats and Republicans on the committee had made a deal. The real people who were there to talk about their experiences with credit card lenders would have to sign waivers allowing the credit card lenders to publicize anything they found in their personal credit records. In other words, to make it “fair” for the credit card companies, they could pull the consumer credit files and look for something to throw mud on the folks there to testify in favor of stricter controls on credit card companies. To the surprise probably of no one, the consumers declined to go forward and testify. (Although some of their prepared testimony is public anyway.)

This deal has received some publicity. (See Elizabeth Warren’s comments as well as The Consumerist.) It deserves more because of what it tells us about Congress’ attitude towards consumers is chilling.

For one thing, the idea was apparently that the credit card banks would have a hand tied behind their back. The consumer could say whatever they wanted but the bank couldn’t come back with a specific reason why that person received such treatment, due to financial secrecy requirements. That sounds reasonable on its face. But think about it: Didn’t they just say that consumers couldn’t be trusted to tell the complete truth under oath before the committee? It’s not a court of law, it is a legislative body considering a new law and taking the viewpoints of both sides.

Here’s the other kicker: The waiver doesn’t really seem designed to make the committee’s work more informed. After all, they could have asked for a waiver after taking testimony as to any specific issue the banks disagreed on. Congressional investigators could have said, “Hey, you said you were charged unfair late fees, can we have access to your records with the lender in order to verify what you said?” If the consumer said no, then the committee would probably take that into account too.

Instead, apparently at the last minute, the banks asked for blanket waivers which would primarily be useful for the banks themselves — after the hearings. In other words, to smear the testimony when it was all over and the consumers couldn’t answer back!

It tells you something else about the current leadership of these committees in the House — they don’t yet know how to do their job well. When professionals for large institutions spring a “fairness” idea at the last minute, anyone should assume there is an ulterior motive. As there was here. Clearly the entire point was to sandbag the consumers and either prevent the testimony or to neuter it enough that there would be no “sound bite” for the evening news. And it worked.

Of course the lobbyists were not acting alone. They had supporters in the committee, like Spencer Bachus (R-AL) — who, no doubt coincidentally, has raised almost half of his congressional war chest from financial services industries. But in theory so did consumer interests, including (one would think) the Chairperson, Carolyn Maloney — to whom the financial service industry has been noticeably less generous.

The reality: The House Subcommittee got suckered. Given the current state of the U.S. Senate — where just enough Senators will still support filibusters to defend the financial service industry — it is likely the legislation would stall long before becoming law in this congressional session. So hopefully the House Leadership has learned an important lesson from this incident: Fairness does not require throwing consumers under the bus. And no lobbyist thinks of “fairness” until he’s found a way to assure the deal will hurt the other side more. That’s his job.

Update:  This blog is being carried by the Inaugural Edition of the Carnival of Politics.  Especially for its debut, this is a remarkable collection of political blogs and I encourage you to check it out.