Credit Card Companies Continue to Hike Interest Rates

Credit card companies are now raising their interest rates on their cardholders before the new credit card reform laws go into effect next February. Gee, we never saw that coming did we? This was about as predictable as the sun setting in the west. You have to wonder what Congress was thinking when they didn’t make the new reform act effective immediately and not 9 months into the future.

As a reminder, credit card reform was signed into law by President Obama in May of 2009. The point of it is to stop predatory practices by credit card issuers who have made billions of dollars by arbitrarily raising interest rates and charging fees to their customers. One of the big complaints against the credit card companies was that if a customer was late even one time their interest rates could soar as high as 29%.

This practice is called universal default and not only would your rates be raised for the card you are late making payments to but the other credit card companies that you have accounts with could also use this as an excuse to raise your interest rate. That will all come to an end in February 2010 but it looks like the credit card companies are making a preemptive strike by going after cardholders before the law goes into effect.

Citigroup, the credit card issuer that was especially hit hard because they aggressively gave credit cards to subprime consumers, recently increased the annual percentage rate on 15 million of their cardholders. These credit cards were issued as retail store credit cards under a partnership between Citigroup and the individual retailers.

So where are the brilliant politicians who wrote up these laws? How could they not see this coming? Rep. Carolyn Maloney, A New York Democrat and chief sponsor of the House’s version of the reform bill, made a statement on Wednesday that it was patently unfair to raise interest rates on existing balances by consumers who pay on time and follow the rules. She also stated that these practices must stop immediately because it was violating the spirit of the new law.

Thanks Carolyn. I mean, how naïve are these people?

Sen. Charles Schumer (D- N.Y.) added that he requested that the Federal Reserve limit any interest rate hikes before the new laws take effect in February of 2010. He also stated that the credit card companies never needed nine months to prepare for the new legislation to take effect and that they are only using this opportunity to wring more dollars out of their customers. You think, Chuck?

Schumer went on to say that this is exactly what he and his colleagues feared when the law didn’t take affect immediately. No kidding Chuck. I mean in all honesty, how could these politicians not have seen this coming? Credit card issuers are facing record defaults and uncertain futures as their profit margins dwindle. Desperate companies, much like desperate people, do desperate things.

It is unclear what if anything the politicians can do about controlling the credit card companies before the new laws take effect but as a longtime observer of Washington lawmakers one thing is certain… we can’t expect too much of these lawmakers because they never fail to disappoint.

Related Information:

1. Don’t Give Credit Card Companies a Reason To Raise Your Rates Keep these things in mind so that your credit card issuer will not raise your interest rates because of them....
2. Will Interest Rate Hikes Backfire on the Credit Card Companies See how credit card companies may be digging themselves into a deeper hole than they're already in....
3. Capitol Hill Moves To Immediately Freeze Interest Rates See how the call of Congress to freeze interest rates will affect you....
4. Credit Card Issuers Raise Interest Rates Again Banks and credit card issuers have once again raised interest rates on credit card account holders....