The Interstate Recognition of Notarizations Act of 2010 was designed to remove impediments to interstate commerce.  While we share this goal, we believe it is necessary to have further deliberations about the intended and unintended impact of this bill on consumer protections, including those for mortgages, before this bill can be finalized.

Notarizations are important for a large range of documents, including financial documents.  As the President has made clear, consumer financial protections are incredibly important, and he has made this one of his top priorities, including signing into law the strongest consumer protections in history in the Wall Street Reform and Consumer Protection Act.  That is why we need to think through the intended and unintended consequences of this bill on consumer protections, especially in light of the recent developments with mortgage processors.

The authors of this bill no doubt had the best intentions in mind when trying to remove impediments to interstate commerce.  We will work with them and other leaders in Congress to explore the best ways to achieve this goal going forward.

H.R. 3808 went barely noticed in the press, and even among members of Congress, until it reached Obama’s desk as the foreclosure fraud crisis came to light. Housing advocates vocally insisted that Obama veto the legislation, as it might make it easier for banks to force foreclosure-related evictions using paperwork without the proper signatures.

But then the Financial Times comes along to report that Citigroup suddenly hiked rates for as many as 15 million holders of cards it co-brands with retailers such as Sears. And Citi did so just months before provisions in the new law that would ban such a move take effect.

Citi isn’t entirely alone. Other card issuers have been gradually raising rates as well, in response to increasing default rates. But the FT said Citi’s hikes have been the sharpest. The paper cited sources close to the situation for its information, not any formal announcement of rate hikes by Citi.

Citi’s rate increases emerged on the day the government proposed legislation to create a new regulator with sweeping powers on consumer protection and a week after the bank was attacked by some politicians for raising employees’ salaries.

Holders of co-branded cards who failed to pay their balance in full at the end of the month saw their rates rise by an average 24 per cent – or nearly 3 percentage points – between January and April, according to a Credit Suisse analysis of data from the consultancy Lightspeed Research.

Citigroup told the FT that despite the fishy timing of the move, raising rates for no particular reason on millions of customers had nothing to do with a new law that would soon prevent it from such an action:

“We have adjusted pricing and card terms for some customers as part of our regular account reviews. This is an ongoing process to ensure we offer terms, interest rates, credit lines and products based on individual needs and risk profiles. [...]

“These changes also reflect the dramatically higher cost of doing business in our industry as we work to preserve the broad availability of credit.”

Yes, it’s that “availability of credit” argument again. For the past decade, whenever anyone dared to mention putting curbs on high interest rates for credit cards or mortgages, the lending industry always warned that any restrictions would lead to less availability of credit.

Things didn’t exactly turn out that way.

If Citi’s strategy of jacking up rates prior to a new law taking effect catches on, consumers with Citi cards would do best to vote with their feet and find another issuer who isn’t playing that game. But it’s not only consumers who might act. Citi famously remains the recipient of government largesse, and this new development has the potential to rank right up there with purchasing a luxury corporate jet right after being bailed out by taxpayers, in terms of public relations damage potential.

Maybe next time Congress takes on legislation to rein in the credit card firms, it should make sure its restrictions go into effect by the time the ink dries on the President’s signature — and not a minute later.

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