The final installment of our 4-part interview on credit card reform with Austan Goolsbee, President Obama’s senior economic adviser. In this one we say, hey, what about mandatory binding arbitration?

BEN: BEN: Ben Popken, Meghann Marco here with Austan Goolsbee, senior economic adviser to Obama and we’re gonna ask him about credit card reform.

MEG: We have a reader question about going over the limit, which is a big fee that everyone is really upset with. The reader asks, “Credit cards allow you to go over the limit and chare you fees for doing that rather than having a clerk reject your credit card for being over the limit. Isn’t there a way to opt out of these services? And shouldn’t there be a simple way to do so?”

AUSTUN: It’s another one of these tricks is that your credit limit is $10,205. Now, you better remember how much you’ve spent for the whole month because when you get to that, it doesn’t reject it. They just send you a fee that says, “Oh, you wen’t over your limit! You didn’t know, but you went over it.” So the President has said, well we ought to do, for example, is have an opt-out box you can check that says “If I get to my credit limit, reject my thing when I try to buy it!” “No no no, you can’t buy it, you’re over your limit.” This is again one of those “Is it reasonable to expect people to know exactly where they are relative to their limit? And when the limits are changing around unilaterally anyway, strikes me, again, as preying on the lack of information on the part of the customer.

BEN: A lot of our readers are interested in these mandatory binding arbitration clauses, and these class-action waivers. Is Obama concerned about that? And are we going to do anything about them? Because that’s another case where we’re stripping consumers of their power. Credit card companies are basically afraid to get into a real court with a consumer.

AUSTUN: The thought of thousands upon thousands of people having to go to court to sue to deal with various credit card problems, because you could see that being unappealing, you can see a role for arbitration. On the other hand, a lot of accusations that these mandatory arbitrations are with firms who are representing themselves to the credit card companies as, they are doing double-duty as debt-collection agencies, as well as mandatory arbitration… if you’re a consumer going to mandatory arbitration with a firm whose job it is to collect money from consumers, to give back to banks, that strikes me as a difficult situation. It’s not an obvious thing. If you ban mandatory arbitration, you will end up with thousands more lawsuits, and that’s not obviously in the consumer’s interest, but on the other hand I think we do gotta be mindful of some of these abuses.

BEN: Right, another one of those, what seems to be an abuse, or at least definitely a conflict of interest, I don’t recall the specific study but they found that basically the arbitrators that were returning judgements in favor of the credit card companies most often got the most business. Will there be space maybe, because obviously what we have isn’t working and chucking it is probably not a good idea either, could we see a mandatory arbitration reform bill down the line?

AUSTUN: That’s an interesting idea, I was going to say, maybe this is due for a Consumerist expose of this stuff. I don’t know which of those is true, I mean, I’m not a lawyer, we’d need to really get the credit lawyers in, to look at this, but I have seen these allegations that you’re speaking of, of mandatory arbitration, of the firms selling themselves to the bank as “We never give the customer anything, hire us as your abitrator!” That seems problematic. If that’s actually what’s happening, it seems like something’s ripe for reform.

BEN: I saved our best, our hardest, question for last. And I don’t want any wiggling. I want a straight answer out of you Goolsbee. What credit card does Obama use?

AUSTUN: What card he uses… does the President get to use a credit card?

BEN: I don’t know, does he have to give that up along with his Blackberry?

AUSTUN: Yeah, he might.

BEN: Well, thank you very much, Mr. Goolsbee, for speaking with us.

AUSTUN: My pleasure. Anytime.

BEN: We learned a lot about credit card reform, what’s in store, what new protections are gonna be added, what we’re looking for to get this credit card game and make it a little fairer for consumers. Ben Popken, Meghann Marco, Consumerist.com, thanks.

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Part 3
Part 2
Part 1

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