April 24 (Bloomberg) -- President Barack Obama warned credit-card issuers they will face new regulations and scrutiny to keep consumers from being hit by “unfair” rate increases and abusive fees and penalties.

Obama said he told 13 executives from the industry, including representatives from Charlotte, North Carolina-based Bank of America Corp. and New York-based American Express Co. that while credit cards are an important source of finance for families and small businesses, consumers too often must negotiate confusing terms that end up costing them more money than they expected.

“The days of any time, any reason rate hikes and late fee traps have to end,” Obama said after meeting with the executives yesterday at the White House. “No more fine print, no more confusing terms and conditions.”

Card issuers are under fire for policies that impose large late fees and boost interest rates on delinquent customers amid higher unemployment and a recession. The Federal Reserve already has issued new rules, due to take effect in 2010. Lawmakers in the House and Senate also are considering legislation to provide more consumer protections.

American Bankers Association President Ed Yingling, who was among those at the meeting, said afterward that Obama was “very clear” about his desire to make disclosures easier to understand and about the practices he wants ended.

Finding a Balance

Obama and the industry executives discussed striking a balance between “the right consumer protections without undermining the availability of credit, particularly at this time when there’s already credit problems in the industry,” Yingling said.

Obama said he is “confident that we can arrive at something that is commonsensical” that permits the industry to thrive while providing credit to consumers and businesses. He said he directed his economic team to work with Congress on the legislation.

He demanded that credit-card issuers “eliminate some of the abuse” in the industry, citing sudden rate increases on cards and changes in fees. According to figures released by the administration, about a fifth of consumers carrying credit card debt are paying an interest rate of more than 20 percent.

Obama also called on credit-card companies to make available “a plain-vanilla” account with simple terms.

‘Clarity and Transparency’

“We want clarity and transparency from here on out,” Obama told reporters after the meeting ended.

The president said he delivered a warning to card issuers that companies that violate consumer protections “will feel the weight of the law.”

Before the White House meeting began, Senate Banking Committee Chairman Christopher Dodd and Senator Charles Schumer released a letter requesting that the Federal Reserve implement its rules immediately rather than waiting until 2010.

“Credit-card providers have been aggressively raising rates on consumers now to avoid the ramifications of this rule when it goes into effect next year,” Dodd, a Connecticut Democrat, and Schumer, a New York Democrat, wrote.

The central bank adopted rules in December that limit rate increases on existing balances and require lenders to give consumers a reasonable time to pay. The National Credit Union Administration and the Office of Thrift Supervision adopted the same standards.

House Legislation

The House Financial Services Committee approved its version of a credit-card “bill of rights” this week that would impose broader restrictions than the Fed limits and take effect as soon as the legislation is signed into law.

The House may vote on the bill as soon as April 30, Representative Carolyn Maloney, a New York Democrat who is a member of the panel, said today at the Capitol. She said final legislation may clear the House and Senate this year.

“We believe, with President Obama’s strong support, we can do it,” she said.

Republican National Committee Chairman accused Obama of “hypocrisy” for criticizing credit-card companies “when his own reckless spending and borrowing is piling debt onto the federal government’s credit card.”

The bankers association has warned the requirements may raise costs and limit the credit availability as banks already are reeling from the recession and the credit crunch.

Delinquent Accounts

At Bank of America, the largest U.S. lender by assets, 7.8 percent of credit-card accounts were delinquent in February by more than 30 days, according to Bloomberg data. That’s up from 5.9 percent last August. Delinquencies are jumping throughout the industry in tandem with unemployment, which reached a 25- year high of 8.5 percent in March.

Charge-offs, which are loans that banks don’t expect to be repaid, increased to an average of 8.02 percent in February from 4.53 percent a year earlier.

“We’re going to have a lot of discussions about the details and that will be difficult,” Yingling said, “but I think everybody’s committed to” finding a resolution.

Obama indicated that the Fed rules were a starting point “and then we look for gaps that the president and members of Congress think need to be filled,” he said. “We’ll work with them to address some of those gaps.”

White House press secretary Robert Gibbs said the industry representatives made the case that “what the Fed is doing is probably enough,” while the president believes there are “things that must be done above and beyond what the Fed has proposed.”

Also at the meeting were Treasury Secretary Timothy Geithner, Obama economic advisers Lawrence Summers and Christina Romer and senior adviser Valerie Jarrett.

The industry was represented by executives from 13 companies, including Barclays Plc, JPMorgan Chase & Co, Capital One Financial Corp., Citigroup Inc., Discover Financial Services, HSBC Holdings Plc, U.S. Bancorp, USAA Federal Savings Bank, Wells Fargo & Co., Visa Inc. and MasterCard Inc.

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net; Julianna Goldman in Washington at jgoldman6@bloomberg.net

Last Updated: April 24, 2009 00:01 EDT