Bill Hardekopf, CEO of Lowcards.com, emails us with his latest on news that Chris Dodd would propoze a rate freeze on credit cards. This comes after Citigroup and others went crazy hiking rates:
Kardekopf: 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 organisations. 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.
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