Senate panel scrutinizes credit card practices

With the threat of new regulations looming, some credit card issuers on Wednesday promised lawmakers they would ease penalties and simplify tiny-print disclosures that few consumers read.

At a Senate hearing on credit-card practices, a top executive with JPMorgan Chase & Co.’s Chase Bank USA apologized to a 29-year-old Ohio man who repaid twice the amount of a $3,200 bill because of interest and fees.

“It just seemed like there was no end in sight,” Wesley Wannemacher told the Senate Permanent Subcommittee on Investigations.

Wannemacher, director of operations at his family-owned Double A Trailer Sales Inc. in Delphos, Ohio, said he was trapped in a cycle of ever-growing fees and penalties for wedding-related purchases. A few days ago, Chase erased another $4,400 he owed as of February 2007.

“Our policies failed, and we deeply regret it,” Richard Srednicki, chief executive of Chase Bank’s card services, said.

Democrat Carl Levin (news, bio, voting record), the Senate panel’s chairman, said legislation may be needed to stop what he called predatory practices by credit cards, such as when companies charge interest and fees on money that has already been repaid.

“Our investigation found that even accounts in good standing are socked unfairly by little known … practices that inflate interest charges,” Levin said.

The high-profile hearing was held a week after Citigroup, the third-largest card issuer, said it will stop automatically raising rates for people who default on payments not directly related to their credit card. The practice is known as “universal default.”

Bank of America Credit Card Services President Bruce Hammonds said his company has never used universal default.

Sen. Norm Coleman (news, bio, voting record) of Minnesota, the top Republican on the subcommittee, said he was concerned about some industry practices. Coleman praised Chase for erasing Wannemacher’s debts and eliminating a practice known as double-cycle billing, which includes tacking on fees based on two prior months.

Alys Cohen, a consumer advocacy attorney, said credit card practices are predatory because of the payment structures. “They can’t pay back the small amount of principal and they’re buried by the fees and interest,” she said.

Outstanding U.S. credit card debt amounted to more than $750 billion in November 2006, according to estimates based on Federal Reserve figures. The industry has more than 640 million credit cards in circulation.

The Federal Reserve is already working on new requirements for companies to disclose various payment and fee schedules, lawmakers and executives said.

“We believe it should be a priority to shorten and simplify disclosure language and to focus on the most relevant terms and conditions,” Bank of America’s Hammonds said.

Levin said he would work with the Senate Banking Committee on legislation to protect consumers from overzealous credit card companies.

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U.S. official: Chinese test missile obliterates satellite

WASHINGTON (CNN) — China last week successfully used a missile to destroy an orbiting satellite, U.S. government officials told CNN on Thursday, in a test that could undermine relations with the West and pose a threat to satellites important to the U.S. military.

According to a spokesman for the National Security Council, the ground-based, medium-range ballistic missile knocked an old Chinese weather satellite from its orbit about 537 miles above Earth. The missile carried a “kill vehicle” and destroyed the satellite by ramming it.

The test took place on January 11.

• Chinese use a missile to ram and destroy an old, orbiting satellite
• Experts: China now may have ability to knock out U.S. GPS and spy satellites
• Washington issues formal diplomatic protest

Aviation Week and Space Technology first reported the test: “Details emerging from space sources indicate that the Chinese Feng Yun 1C (FY-1C) polar orbit weather satellite launched in 1999 was attacked by an asat (anti-satellite) system launched from or near the Xichang Space Center.”

A U.S. official, who would not agree to be identified, said the event was the first successful test of the missile after three failures.

The official said that U.S. “space tracking sensors” confirmed that the satellite is no longer in orbit and that the collision produced “hundreds of pieces of debris,” that also are being tracked.

The United States logged a formal diplomatic protest.

“We are aware of it and we are concerned, and we made it known,” White House spokesman Tony Snow said.

Several U.S. allies, including Canada and Australia, have also registered protests, and the Japanese government said it was worrisome.

“Naturally, we are concerned about it from the viewpoint of security as well as peaceful use of space,” said Yashuhisa Shiozaki, chief cabinet secretary. He said Japan has asked the Chinese government for an explanation.

Britain has complained about lack of consultation before the test and potential damage from the debris it left behind, The Associated Press reported.

The United States has been able to bring down satellites with missiles since the mid-1980s, according to a history of ASAT programs posted on the Union of Concerned Scientists Web site. In its own test, the U.S. military knocked a satellite out of orbit in 1985.

Under a space policy authorized by President Bush in August, the United States asserts a right to “freedom of action in space” and says it will “deter others from either impeding those rights or developing capabilities intended to do so.”

The policy includes the right to “deny, if necessary, adversaries the use of space capabilities hostile to U.S. national interests.”

Low Earth-orbit satellites have become indispensable for U.S. military communications, GPS navigation for smart bombs and troops, and for real-time surveillance. The Chinese test highlights the satellites’ vulnerability.

“If we, for instance, got into a conflict over Taiwan, one of the first things they’d probably do would be to shoot down all of our lower Earth-orbit spy satellites, putting out our eyes,” said John Pike of globalsecurity.org, a Web site that compiles information on worldwide security issues.

“The thing that is surprising and disturbing is that [the Chinese] have chosen this moment to demonstrate a military capability that can only be aimed at the United States,” he said.