In an effort to protect consumers in a revamped financial system, a House panel on Thursday approved a measure that would require banks to tell customers whether their products are federally insured.
The overwhelming vote by the House Banking Committee came after its adoption of far-reaching measures allowing banks and commercial companies to combine. The latest proposal drew 33 votes of support, with only seven lawmakers--all Republicans--voting against it.
The vote was taken during drafting of legislation that would get rid of Depression-era restrictions that bar banks, brokerages and insurers from getting into one another’s businesses.
Meanwhile in the House, Rep. Joseph P. Kennedy II (D-Mass.) introduced legislation that would force credit card companies to make it easier for consumers to discover how high their interest rates will be after the initial short-term deal.
“Credit card companies shower consumers with new credit cards, often luring them in with teaser rates and easy credit,” Kennedy said. “Then, once a consumer has run up a significant level of debt, they lower the boom.”
The bill would also ban credit card companies from charging customers for paying off their balances in full each month, as some companies do.
It would allow consumers to cancel their cards and pay off the balances under the old terms if companies raise interest rates or fees. And if a consumer maintains a balance, the company could not charge interest on new purchases until after the normal grace period.
Credit card companies objected to Kennedy’s proposals.
“MasterCard believes that the competitive marketplace should determine how credit card products are priced,” the company said in a statement. “Restricting how financial institutions can price their products will mean less choice for consumers.”
Under the measure passed by the Banking Committee, banks would have to use disclosures that are “conspicuous, simple, direct and readily understandable,” such as “not FDIC-insured” or “may go down in value.”
The measure would also require banks to sell only products that are suitable for their customers’ financial circumstances. A similar rule applies to securities brokers.
On Wednesday, the panel adopted a measure letting commercial companies buy smaller banks, extending its earlier action approving banks’ investments in companies.
Both actions came over the opposition of the panel’s chairman, Rep. James A. Leach (R-Iowa).
Backers of the measures say the changes are needed because of upheavals in the banking and financial services industry. If approved, the legislation would enable Americans to carry out one-stop financial shopping, they say.
Critics worry the changes could concentrate economic power to the detriment of consumers.