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From the October-01, 2008 issue of Credit Union Times Magazine • Subscribe!
Issuing Cards to the Underserved
WASHINGTON -- A coalition of minority groups, card issuers and business organizations has issued a proposal to keep the needs of lower income consumers for affordable credit from being swallowed up in consumer protection regulations.<p>The Citizens for Equal Access to Credit proposal consists of a statement of principals aimed at legislators and regulators and a code of practices aimed at card issuers. The statement of principals seeks to educated legislators, regulators and the public at large about the goals and concerns of lower income consumers seeking credit, while the code of practices seeks to reform some of the practices of issuing cards to lower income consumers.</p><p>The CEAC statement of principals said that that the federal government "should understand, and remain sensitive to the reality that low-limit cards represent a bridge to the economic mainstream for persons from underserved and unbanked communities." </p><p>The principals also said that the federal government should understand that requiring otherwise qualified applicants to pay a significant portion of credit card fees upfront would have an adverse impact on access to credit for persons from underserved communities.</p><p>The federal government should act to protect consumers by requiring credit providers to meet high standards in disclosing obligations to consumers and affording customers flexibility in making payments. However, these efforts should be balanced to ensure that access to credit for minority and underserved communities is protected, CEAC concluded.</p><p>"We fully support the efforts of regulators to protect consumers, but we definitely want to make sure lower income people keep access to credit," explained Earnest Baynard, spokesman for the group.</p><p>Baynard admitted that much of the group's effort is aimed at protecting the ability of card issuers to risk-based price their cards. The group fears that if they are prevented from doing so, or if lower income consumers are forced to put up sizable fees up front when they open accounts, access to the cards will dry up.</p><p>"Seventy million people in this country could not qualify today for a prime rate credit card," Baynard said. "That's one in three consumers. Those people need to have a voice in this process," he added.</p>
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