By Mark Huffman
ConsumerAffairs.com
September 25, 2009
When Congress passed a package of credit card reforms in May, the new law gave banks until February 1, 2010 before the new rules would be implemented. Now, some lawmakers say that was too much time.
Two Congressional Democrats, Rep. Carolyn Maloney (D-NY) and Rep. Barney Frank (D-MA), who chairs the House Financial Services Committee, said they will push to speed up implementation on December 1, 2009, two months ahead of schedule.
Maloney said credit card companies have used the time between passage of the law and the implementation date to squeeze additional money out of their customers. For example, under the new law, credit card companies will not be allowed to raise rates on existing balances. They can't raise rates without notifying customers 45 days in advance. Maloney says that has led to a flurry of changes to credit card account terms over the last couple of months.
Starting in June, Chase began contacting customers who had taken advantage of a promotion and transferred large balances to a Chase account at a low interest rate that was promised for the life of the loan. But the guarantee said nothing about the minimum monthly payment.
At the time of the promotion, the minimum monthly payment was two percent, and many customers, like Waymon, of Deland, Fla., made the balance transfer based on what they could afford to pay monthly.
"I took advantage of the 4.9 percent offer," Daymon told ConsumerAffairs.com. "Chase has now increased the monthly payment to five percent. The balance on this card is approximately $9200, which means the minimum monthly payment went from $190 to $469."
Waymon says a Chase customer service rep told him he could continue paying the two percent per month, but that the annual interest rate would go up. Other Chase customers who have participated in the "low interest rate for the life of the card" promotion have posted similar stories.
Chase also closed a large number of accounts that were former Washington Mutual Credit Card accounts. Neither of those activities would be specifically barred under the new rules, but industry analysts say all credit card companies are trying to get themselves in the most favorable financial position possible before the new rules take effect. It seems nearly every credit card company adjusted its rates over the summer months.
"On Capital One's credit card statement this month, I noticed the percentage rate had jumped from 7.9 percent to 17.9 percent," Brian, of Hazelton, Pa., told ConsumerAffairs.com. "I contacted customer service and was told this rise was due to the current economic climate."
The "economic climate" is not specifically about the interest rate climate. Interest rates are near an all time low, hardly a reason to be raising consumers' credit card rates. Instead, banks are increasingly worried about customers' ability to repay the money they have borrowed.
The credit card default rate has risen past 10 percent, so banks are attempting to collect more money from customers who are still paying their bills to offset potential losses on other accounts.
Consumers, however, are confused and angry and have pressured lawmakers like Maloney and Frank for relief.
The two lawmakers say they will sponsor legislation to speed up implementation of reforms, but with Congress's full plate of issues, the legislation -- which would have to be passed in the next 60 days -- faces an uncertain future.
It will also face strong opposition from the banking industry. A spokesman for the American Bankers Association said it would be extremely difficult, if not impossible, to meet the December 1 deadline.
