Dodd Proposes a Freeze on Credit Card Rates
Today, Senate Banking Committee Chairman Chris Dodd introduced new legislation that would immediately freeze credit card rates on existing balances through February of 2010. Dodd felt this bill would prevent issuers from further interest rate hikes that have taken place since the Credit CARD Act was signed into law in May of this year.
"No sooner had it been signed into law, credit-card companies were looking for ways to get around the protections this Congress and the American people demanded," said the Democratic Senator. "This bill would end those abuses and further protect customers today."
Since the beginning of the year, LowCards.com has recorded almost 60 changes made by nine different credit card issuers, many of which are APR increases. In the last two weeks, Bank of America added an annual fee to some cards and Citi has raised the APR to 29.99% for many cardholders as well as cancelled the accounts of customers holding some of their co-branded cards.
The changes in terms and card closures are hot issues for consumers. Congress is reacting by trying to move up the effective date of some provisions of the CARD Act from February 22 to December 1. Last week, the House Financial Services Committee approved this but analysts predict that this will not pass in the Senate.
"The actions of the credit card issuers should not be a surprise to anyone, especially Congress. When the CARD Act was being discussed, the issuers said they would have to raise rates and make changes to make up for lost revenue. They warned Congress that these changes would affect a broad spectrum of customers. That is exactly what they have done. They have raised rates, increased fees, added annual fees, moved fixed rate cards to variable rates, and cut rewards," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.
"The banks and issuers are not philanthropic organizations. They are for-profit companies that have already lost billions of dollars and have struggled for over a year to rebound from the financial crisis. The high delinquency and default rates in September show that credit card issuers are still facing difficult times and this will probably continue into 2010. Issuers will still have to find ways to increase revenue and reduce risk. If Congress put a freeze on interest rates, you can bet that issuers would find other ways to make up for this lost revenue."
This new legislation would also require credit card companies to review all rate increases on credit card holders since the beginning of this year to see if they were justified.
"No sooner had it been signed into law, credit-card companies were looking for ways to get around the protections this Congress and the American people demanded," said the Democratic Senator. "This bill would end those abuses and further protect customers today."
Since the beginning of the year, LowCards.com has recorded almost 60 changes made by nine different credit card issuers, many of which are APR increases. In the last two weeks, Bank of America added an annual fee to some cards and Citi has raised the APR to 29.99% for many cardholders as well as cancelled the accounts of customers holding some of their co-branded cards.
The changes in terms and card closures are hot issues for consumers. Congress is reacting by trying to move up the effective date of some provisions of the CARD Act from February 22 to December 1. Last week, the House Financial Services Committee approved this but analysts predict that this will not pass in the Senate.
"The actions of the credit card issuers should not be a surprise to anyone, especially Congress. When the CARD Act was being discussed, the issuers said they would have to raise rates and make changes to make up for lost revenue. They warned Congress that these changes would affect a broad spectrum of customers. That is exactly what they have done. They have raised rates, increased fees, added annual fees, moved fixed rate cards to variable rates, and cut rewards," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.
"The banks and issuers are not philanthropic organizations. They are for-profit companies that have already lost billions of dollars and have struggled for over a year to rebound from the financial crisis. The high delinquency and default rates in September show that credit card issuers are still facing difficult times and this will probably continue into 2010. Issuers will still have to find ways to increase revenue and reduce risk. If Congress put a freeze on interest rates, you can bet that issuers would find other ways to make up for this lost revenue."
This new legislation would also require credit card companies to review all rate increases on credit card holders since the beginning of this year to see if they were justified.
