View Full Version : Members of Congress take on credit card firms

12-04-2007, 11:01 AM
WASHINGTON - Some members of Congress are denouncing credit card industry practices that include raising interest rates for customers whose credit ratings decline, even if they make their card payments on time.

Industry critics say it's one more example of abusive, confusing practices that can push consumers deeper into debt.

Sen. Carl Levin, D-Mich., chairman of a Senate Homeland Security and Governmental Affairs subcommittee, is holding out the club of possible legislation to spur voluntary changes.

'Abuses need to be remedied'
"Working people are being squeezed,'' Levin told reporters Monday. In a call for "good, strong legislation'' to be enacted next year, Levin said that "these abuses need to be remedied. ...We have some real momentum for reform.''

With Americans weighed down by some $900 billion in credit card debt _ an average $2,200 per household _ practices of the very profitable industry have been ripe for scrutiny by the Democratic-controlled Congress. They have also grabbed the attention of the Federal Reserve, which plans to require credit-card issuers to give customers at least 45 days' notice before raising interest rates and to provide clearer information on fees.

On Tuesday, Levin's subcommittee, which has been investigating the industry, will look at how credit-card issuers raise consumers' rates -- to as high as 30 percent -- when their so-called FICO credit scores decline even if they've paid credit card bills regularly and promptly. In many cases, consumers have little notice of the increased rate, which are automatically triggered by declines in FICO scores for reasons left unexplained, the subcommittee found.

In some cases, just opening another account, such as a department store credit card, could trigger the downgrade in credit score.

In one of the cases cited by the subcommittee, Marjorie Hancock of Arlington, Mass., wound up with interest rates on her four Bank of America credit cards of 8 percent, 14 percent, 19 percent and 27 percent, even though her credit risk is the same for all four.

Ken Clayton, managing director of card policy for the American Bankers Association, which represents the banking industry, said: "Costs for nearly every product can change, be it because consumer's risk profiles change or because underlying costs change. Credit cards are no different.''

Five big financial companies -- Discover Financial Services LLC, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Capital One Financial Corp. -- issue around 80 percent of U.S. credit cards, according to the subcommittee.

Citigroup and JPMorgan Chase recently have said they will discontinue the practice; Citigroup's change already is in place and JP Morgan Chase's will take effect in March. But Levin says legislation may still be needed to get other companies to do the same.

Customers "have the right to say 'no'"
Larry Di Rita, a spokesman for Bank of America, said its customers "have the right to say 'no' to an increase.''

In March, the subcommittee focused on complex billing and interest-rate practices, such as charging interest on balances paid on time but not in full, and so-called double-cycle billing _ which eliminates the interest-free period of consumers who move from paying the full balance monthly to carrying a balance.

The week before the subcommittee's hearing in March, Citigroup announced that it would no longer make ``any-time-for-any-reason" increases to interest rates and fees charged to customers until a credit card expires and a new one is issued, usually in two years.

web page (http://www.msnbc.msn.com/id/22090817/)

12-04-2007, 11:09 AM
If a company charged what these credit card companies do back in the sixties, they would have been in jail for loansharking. As we have now decided that borrowers are not really responsible for the credit they use, as we transition to a no fault society, maybe the credit card companies will be forced to bail out the people they have tricked into the "credit they deserve."

Its strange they prey on the same classes that the loan sharks did 50 years ago. I wonder how much these companies have donated to Hillary and Rudy?

12-04-2007, 06:16 PM
The part that got me was when the guy from BofA said that by raising interest rates, they were helping the consumer pay off their debt quicker! If they are struggling at 14%, I'm sure raising it to 30% will help! /ccboard/images/graemlins/confused.gif /ccboard/images/graemlins/confused.gif
Yeah...it will help the bank!!! /ccboard/images/graemlins/frown.gif

12-04-2007, 06:20 PM
I have the nasty habit of paying off my credit cards in full each month. After getting several whiny letters from one of the Visa folks about their 'concerns' I learned that they had hiked my debt balance interest rate to 24%.


Because I was paying my account in full each month and they thought that reflected badly on my capacity to carry debt!

Go figure

12-04-2007, 06:23 PM
Bank of America is headquartered in our hometown. As one of the largest employers in the state, we get a lot of news about them that probably doesn't get across the country. I closed every account I had with them last year. I just don't like the way they do business.

12-04-2007, 06:35 PM
I just terminated a 25 + year dealing with Ca. BoFa, over a "late" fee. I paid $100+ on time in Nov. then added what I thought was an early payment of $300 for Dec. But they posted it on the 27th, the last day of the cycle, and held back my balance payment of $65 due to the Vet's holiday.....then charged me $39 for the late due payment of $15...After several calls and emails, and much boiler plate response.....they adjusted the fee to $19...and I thanked them politely, then told them to stick the two cards where the sun don't shine. Customer Service is an oxymoron at BoFa, but at least unlike the friendly staff at American Express, English is their native language.
I recently read that Banks and lending companies are getting more creative with their fees and hidden fees....we might as well go to the "Money Tree'...at least there, you know they're going to "sock it to you"
I still have a BoFa account up here...friendly, professional staff...and who ever heard of a Bank serving free coffee and home made cookies? I eat breakfast there now instead of at the mission....

12-04-2007, 06:43 PM
I read that people who pay off their acc'ts on a monthly basis, get a lower credit rating then those that make the regular monthly installments.But if you have a substantial balance, and make just the monthly min payments...it looks to me like the interest is 40% of the payment.....no wonder folks have a hard time getting out of debt

12-04-2007, 07:17 PM
Wolf,If you are not making money for the bank,they don't want you as a client. I have my accounts with the Calif.Teachers Credit Union,and I could not be more pleased.

12-05-2007, 08:18 AM
I did get a credit card not renewed a few years ago for paying the balance in full each month. You are right. If you don't generate income, they don't want you. I now leave a few dollars on my Visa each month to make sure I have one. Some placed don't take AE.

12-05-2007, 08:43 AM
<blockquote><font class="small">Quote Deeman3:</font><hr> I did get a credit card not renewed a few years ago for paying the balance in full each month. You are right. If you don't generate income, they don't want you. I now leave a few dollars on my Visa each month to make sure I have one. Some placed don't take AE. <hr /></blockquote>

But they DO make money off every single purchase - even if you're paying off the balance each month. Typical merchant charges for accepting credit cards runs about three percent a hit. Visa, MasterCard etc. get a three percent kickback every time you use their card.

For each purchase, the bank charges a commission (discount fee), to the merchant for this service and there may be a certain delay before the agreed payment is received by the merchant. The commission is often a percentage of the transaction amount, plus a fixed fee. In addition, a merchant may be penalized or have their ability to receive payment using that credit card restricted if there are too many cancellations or reversals of charges as a result of disputes. Some small merchants require credit purchases to have a minimum amount (usually between $5 and $10) to compensate for the transaction costs, though this is not always allowed by the credit card consortium. <hr /></blockquote>

web page (http://en.wikipedia.org/wiki/Credit_card)

12-05-2007, 09:50 AM
Then maybe they just did not like me. I believe it was mostly because I used the card so rarely, when AE was not accepted, that they must have thought that the small amount they got for my purchases did not warrant to billing, etc. I think many depend on your screwing up and then slamming you bwith the higher interest rates as well.

12-05-2007, 09:54 AM
Wolfdancer my daughter works in the SubPrime mortgages and I questioned her about my credit score only being in the 650s even tho I owned my own home, had no real debt, paid my few cards on time automatically. Her response was Dad you have no bills. To get a higher score you have to incur more debt. Does that make sense.####

12-05-2007, 10:00 AM
I fully agree. There's a funny thing about using a credit card to charge purchases versus writing a check or pulling cash out of your wallet - balancing your checking account when you write a check will prove to you that you had more money before and less money after - pulling cash out of your wallet will leave you with less cash (very visual reminder).

But charging something to your credit card? The size of the card never changes. It doesn't shrink as it's used - giving users the false impression that when it's been used nothing has physically changed.

Combine this with the allure of making minimum monthly payments against an outstanding balance and you have the built-in potential for spiraling credit card debt.

Gee look, honey - the CC co. says we just spent five grand but we 'only owe' them ten percent minimum payment this month (plus a hefty dollop of interest).

How much more alluring can it get?

12-05-2007, 11:33 AM
It's the same thing that happens in Casinos....it's easy to bet 4 "quarter" chips, but if you had to keep pulling hundred dollar bills out of your pocket.....
Even on my last card debt of less then $500,paying the min
of $15...with interest, would have taken over 4 years