U.S. Senate Subcommittee Members Slam Credit Card Issuers
Published December 4th, 2007 in Credit News.
This morning, members of a U.S. Senate subcommittee slammed credit card issuers for the way they commonly raise interest rates, sometimes rather arbitrarily.
In recent months, lawmakers have been putting pressure on credit card companies to change their seemingly unfair practices, such as universal credit default and credit score monitoring.
In some cases, credit card issuers will raise cardholder interest rates if a consumer’s credit score dips, even if they have exhibited a solid payment history.
According to the panel’s report, two of the nation’s top-five credit card companies, Bank of America and Discover, automatically increase cardholder interest rates when their credit scores drop.
These card issuers also impose universal credit default, which can lead to an interest rate increase if a consumer is delinquent on an unrelated account.
Earlier this year, Levin introduced legislation that would prevent card issuers from applying interest rate increases retroactively to existing credit card debt.
And positive changes are beginning to surface, as both Citigroup Inc. and Chase have announced this year that they would no longer use credit scores to “re-price” customer interest rates during a card’s term.
Most card issuers argue that risk-based pricing benefits the majority of consumers, lowering APRs and providing more favorable terms overall.
