Credit card company practices hit new low
I was up getting dressed this AM and heard a report by Ali Velshi, CNN’s senior business correspondent, about the latest “bend over” practices by credit companies.
Some of these sharks are bumping the interest rates of customers up to 30% — even if they never miss a payment, never are late sending in a payment — simply because their credit score dips a few points.
What’s wrong with this? Your credit score can take a hit for simply opening a new card account with a retailer (Velshi cited a department store card as an example). It can also take a hit if your credit is checked by vendors too frequently in a short period.
This practice is so egregious that CNN reported that both Citicorp and Chase have announced that they will cease doing this; Congress is looking into the matter since it’s clear most credit card companies refuse to police themselves as they rape customers with otherwise good credit history. (AP):
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.
“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.”
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.
…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.”
It will be interesting to see what position Joe Biden, presidential candidate and a senator from Delaware and home to most of the credit card industry, will come down on all of this.