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.
Experts don’t seem to be surprised by the actions of the credit card issuers. During discussions regarding the CARD Act, issuers said they would have to raise rates and make changes to make up for lost revenue and warned Congress that these changes would affect a broad spectrum of customers.
Among the changes through the passing of this act: rates have been raised, fees have been increased, annual fees have been added, fixed rate cards have been moved to variable rates, and rewards have been cut.
Because both banks and issuers are for-profit companies that have already lost billions of dollars and have struggled for over a year to rebound from the financial crisis, they are seeking to find ways to increase revenue and reduce risk. Based on the high delinquency and default rates in September, experts say that credit card issuers are still facing difficult times and that this will probably continue into 2010.
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.