Sunday, April 12, 2009

The Real Reason My Rate Went Up

The real reason the rate on my credit cards went up so much was not because of the economy but because of legislation that is before Congress. At the end of March a Senate Committee passed:

By a 12-11 vote, the Senate Banking Committee narrowly approved a bill aimed at cleaning up unfair and deceptive practices by credit card companies criticized for surprising customers with fees and unilaterally changing terms.

Unilaterally changing terms. That sounds familiar some how doesn't it.

Here's a excerpt from a column by Allan Sloan in the Post:

Fix credit card rules. Some banks can change the interest rate on credit card balances for pretty much any reason, including if a borrower misses one payment, even if it's for something like a utility bill. So instead of being on the hook for, say, 12 percent interest (which is bad enough), borrowers may suddenly find themselves paying an obscene 29.9 percent. Regulators are trying to deal with aspects of this problem, but Congress could eliminate it overnight through legislation.


The banks' policies are disclosed in the all-but-unreadable notices they send their credit card customers. That makes it legal. But it's wrong. It's especially wrong now, when so many people are struggling to pay their bills and are likely to fall into the missed-payment, higher-rate trap that would make their lives even more difficult.


The "reason" from Bank of America for raising the rate was the economy. Well raising the rate is not going to improve things for people; it will only make it worse. But then again hiking the rate of the credit card and introducing all sorts of fees is a great way for a bank to make up let's say bad investments.

But the banks are going to get some extra time to implement the new policies. Read about it here.

From this article comes one of the more ridiculous things said about this issue:

The American Bankers Association trade group, which represents the biggest credit card companies, have warned that more rules could make it more difficult to price a customer's risk level and therefore reduce the availability of credit.

"We still believe it is an open question whether any further legislation is necessary," said Ken Clayton, senior vice president for card policy at the ABA.


Wow there's a surprise the lobbying group for banks opposing legislation to regulate their industry. I think the legislation proposed by Congress is more than reasonable. It's about time banks begin to realize they don't get to call all the shots.



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