Treasury Henry Paulson Jr. announced this week that the government and the Federal Reserve plan to offer such loans to banks to help shore up their shaky portfolios of credit card and other consumer loans. But the bailout will come with significant demands for reform of credit card lending practices that consumer advocates say are deceptive, USA Today reported Friday.
"The credit card industry has built a profit model off of people's mistakes, and that's got to change," Robert Lawless, bankruptcy law professor at the University of Illinois, told the newspaper. "The American people won't want to be co-owners of an industry that uses trickery to make money off the backs of the middle class."
Lawless predicted lending reforms will become a top priority of the incoming administration of U.S. President-elect Barack Obama.
USA Today says its investigation found that banks sharply boosted credit card rates and fees, then enticed consumers to take out home equity loans to pay off the high card balances.
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