Credit card issuers hike rates in response to Obama's credit card reform law

[brentspeak]

This is what happens when you don't push for interest rate caps. A child could have seen this occuring

http://www.cbsnews.com/stories/2009/08/20/eveningnews/main5256257.shtml

...

Since President Obama signed the reforms into law, the average variable rate has increased from 10.8 percent to 11.2 percent. A new report today finds credit limits have been slashed for 33 million people - half of them with excellent credit scores.

"I don't think we've seen the end of the reign of terror of credit card companies," said Adam Levin, founder of Credit.com.

According to BillShrink.com, Capital One has increased its interest rates to almost 12 percent. Discover has hiked fees 30 percent. And Citigroup is beginning to add new annual fees, some in excess of $30.

But the industry denies it's waging a pre-emptive strike to cash in before all the rules kick in.

"That's a red herring," said Scott Talbott of the Financial Services Roundtable. "The two main factors in changing the interest rate or your credit limit are the customer's risk profile as well as general economic lending conditions. That's what's driving the train here."

That also may be driving people like Daisy Mitchell out of business.

When Chase raised Mitchell's credit card rates from 10 to 14 percent, she says she was forced to shut down her children's boutique near Orlando.

"At first I thought, 'Is this even legal?'" Mitchell said. "I lost everything, apparently for no reason."

The new rules are designed to protect consumers. But before the strictest reforms take effect, consumers may find themselves more vulnerable than ever before.

[nickinSTL]

1. the whole bill is a waste

it does virtually nothing to really curb the abuses by the credit card industry.

Again, the lobbyists won.

[ProSense]

2. No this is what greedy corporations do before laws take effect. n/t

[brentspeak]

3. So what in the new law will stop them from raising interest rates anyway?

Nothing. The law doesn't do anything to prevent banks from raising CC rates. All it does is require them to do a better job of notifying their customers/victims of the impending rate increase. That's all.

[SemiCharmedQuark]

8. No, it allows consumers to opt out and pay off their CC at the old interest rate.

According to the article you posted:

"Help is one the way for struggling credit card holders. Starting today companies must give consumers 45 days notice of any rate increases instead of 15 days. Consumers can opt out and pay their balances off at the lower rate. Companies also must send statements 21 days before payment is due, instead of 14 days. "

And

Retroactive interest rate hikes on existing balances are banned, except when:
•An introductory or "teaser" period ends.
•The interest rate is tied to an index and is variable.
•The card user completes the terms of a workout plan for debt repayment or fails to  comply with terms of a workout plan.
•The card user is more than 60 days late making a monthly payment. The card issuer must give the reason for the increase and must restore the interest rate to the previous, lower level after six months if the cardholder has made on-time payments during that six-month period.

http://www.creditcards.com/credit-card-news/credit-card-law-interactive-1282.php

[ProSense]

31. "Help is one the way for struggling credit card holders..."

Ignoring the facts for spin is better. Yet people think it's only the RW who are disingenuous.

[OwnedByFerrets]

46. IF IF IF I could afford to PAY OFF

my GD cards, I would do it now. How is giving them 45 day notice of "execution" going to help ANYONE??

[ChiciB1]

62. My Ex-Sister-In-Law Called Me Yesterday Asking If I Knew Of Any Place

she could turn to because of interest rate hikes. I told her of 3 that I knew of, but when she called them they all said they charged a monthly fee.

I only had one card myself with WaMu, and when they raised my 6.5% to 10.24% for no good reason, I just contacted my Credit Union and transferred the balance to them. I NEVER was late, always paid on time and even though I still had a median balance, I paid way more than needed. By median I mean $1500.00 or less. The day I got my cards from the credit union, I got yet another letter from now Chase saying my rate would be 17.24% But they were too late, I had already left them.

Yesterday I got a letter from Sears, a card I've had for over 20 years telling me I could opt out. Not a problem because I haven't used the card in years. My credit amount was $7,000.00 with them, but still they sent the letter! I'm calling them to say I'm cutting up my card, don't need them and haven't for years!

I wish there was something I could do for her, but I'm not rich enough to cover her debts!

[OwnedByFerrets]

65. Its really bad out there. The most scary time of my life....

mostly brought about by greedy bastards who only care about playing/winning the GAME.

[ChiciB1]

66. Yes, She Was Crying Yesterday & I've Been Thinking About Her Since Then!

She's by herself and I know she's scared to death! I commented below that since she didn't own property or had any real collateral that maybe she should "just not pay them!" Don't know if that will work or not! What can they do to her??

[Amerigo Vespucci]

4. Bank of America assigned the "penalty" rate to my card, and I have a clean record

They did this to a number of people a short while back. A little love letter arrived in the mail telling me that due to my level of outstanding debt, they would be raising my interest rates.

Wish I could pay the card off quickly and tell them to shove it, but that's not going to happen, unless I get a windfall.

[moriah]

23. They closed mine -- never missed a payment...

... on them or on any other debt I have in the last five years, had their card for over three years. The only negative information reporting on my credit are two late student loan payments -- the loan is since paid off. And they GAVE me the card knowing about it! Said the number one reason was late payments. From five years ago?

How does raising my rates and lowering my available credit on my reports, which will contribute to my utilization of credit looking like it's going up, which will contribute to other cards doing the same thing -- either closing cards or raising rates -- make me more likely to pay what I owe them?

Talk about shooting themselves in the foot.

[seabeckind]

24. BOA raised my rates and fees

It was my backup card, used once every year or so and paid when I got the bill.

Cancelled it.

I guess they don't make much off people who use a credit card as a convenience to keep from carrying cash or dealing with the hold amounts for debit cards.

[ChiciB1]

67. When I Asked Chase Why They Were Raising My Rate, A GOOD Customer....

I was told it was because of "those who don't pay" and I almost lost it! So, because I'm a GOOD customer, I get a rate hike for BAD customers!!

I'm just thankful I was able to drop them! That kind of thinking is outrageous!! Yes, I know Emergency Rooms at the hospital do the same thing, but that's life & death... this is just PURE GREED!

[calimary]

48. AMERICAN EXPRESS did that to me. Repeat: AMERICAN EXPRESS.

They lowered my limit - TWICE. I have an impeccable track record - ALWAYS paid more than the minimum. ALWAYS paid on time, if not early. ALWAYS - WITHOUT FAIL. I have kind of a thing about that - keeping a good record. And STILL they fucked me over twice.

Then, we applied for a business American Express card for this new family business we started. I got a rejection letter from them, citing how their records showed my credit limit had been reduced lately.

FUCK THEM. AMERICAN EXPRESS. ABSOLUTELY LEAVE HOME WITHOUT THEM!!!!!!!

Pass it on.

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[brentspeak]

5. Wow, check out the negative recs. It seems we have banking trolls here on DU

By "banking trolls", I don't mean tellers, other local branch workers, HQ admin staff, and others who do banking grunt work. I don't mean the actual human beings who work in the banking industry. I mean, of course, the executives, the executives' PR flacks, the DLC suck-ups, the K-Street lobbyists, etc. Scum like that.

[ChromeFoundry]

6. I still think the unrecommend feature...

is a stupid idea. Thanks for the article.

[brentspeak]

7. You're welcome

:)

[OhioChick]

9. No shit....

I noticed that, myself. Obviously, some don't want to see this make front page. Makes you wonder....

[QC]

26. When you criticize The Leader's policies you criticize The Leader.

This is unacceptable.

Do you really want Sarah Palin to take over? :scared:

[dolphindance]

10. Gee, I need the government to protect me from EVERYTHING. WAAAH.

Tell you what. You don't like credit cards? Don't use them or pay off your balance at the end of the month.

That simple.

[depakid]

11. This attitude is why America's sliding into third world status

And, for some folks- the trend is well deserved.

[dolphindance]

13. I just don't subcribe to this theory that the free market is worthless.

If a credit card company has rates that are too high, then let them crash and burn while others with lower rates get consumer business.

Eventually they will get with the program and adjust their offerings.

We don't need regulations on everything.

And if somebody gets caught with a contract that bleeds them dry with high rates, then let that be a lesson to them about using credit responsibly. Not to mention that these new regulations help with exactly that -- letting consumers know in clear language what they are getting into.

[depakid]

17. You sound more like a "free" market fundamentalist- and your ideology has failed

time and time again in the financial sector. And no- these new "regulations" are largely toothless- window dressing, that won't help consumers much, but will hurt the overall economy.

[QC]

27. Amazing how much right wing bullshit is posted here lately. n/t

[truebrit71]

74. No kidding right?!

:eyes:

[seabeckind]

25. Great theory -- doesn't work in practice

In most industries anymore there has been so much consolidation there is no competition anymore and the free market idea collapses. 30 years ago when there were hundreds of credit card issuers franchising the brand cards it worked. Today, not so much.

Time to bust the trusts again.

[GOTV]

40. I see. You have one trick. Misrepresent the opinion of others to appear ridiculous ...

... in an attempt to appear reasonable.

No one suggested that we should be protected against everything and no one said the free market is worthless.

Your straw men are exceedingly feeble, even for straw men. You certainly must feel powerful to have knocked down those imaginary arguments.

[libertypirate]

12. Must be nice to be that simple....minded

Some of us are in a financial bind and credit cards are the only way to survive right now. What's wrong with telling them they shouldn't be raping us for everything they can get, because they have some "right" to profits? You're apparently ok with these companies taking advantage of people when they're struggling. Nice.

[boppers]

16. Ouch. Bad choice.

Going to the mafia would have been a worse choice, but going to credit card companies can totally wreck a person for years.

How bad are you in, and how fast can you get out?

[libertypirate]

37. Depends how fast I can find a job.

Not too far in fortunately. That was our last resort after being out of work for a year and having already drained savings. Living on EDD is not ideal and not enough to make it month to month. The good news is the money we borrowed is interest free until July 2010. Hopefully, we'll be back on our feet to pay it off by then.

[Dr.Phool]

15. Hey, Genius. Part of the gov'ts job is to protect citizens from predators.

When a bank can jack up interest on a pre-existing balance, by 10 points or more, for no reason, it's a crime. Chase tried pulling that shit on me. Especially since they borrow money from US, at ZERO interest, to make the goddamned loans in the first place. Not to mention that we bailed their asses out, and prevented them from collapsing last year.

Understand, Bozo?

[ItNerd4life]

60. Hey genius, the gov't is doing a crappy job!

Sorry, but why didn't the law take affect immediately?
Why didn't it protect us from excessive rates?

Please, don't make statements personal and think about the whole picture.

[brentspeak]

20. Ok, you first: call up your local police dept

and tell them you don't want to be "protected from EVERYTHING...WAAAH". Tell them in advance that, from this day forward, you decline their gov't-sponsored protection. And don't forget to add the "WAAAH" when you ring them up. Put a large sign on your front door which states, "ATTENTION: I refuse any and all police assistance."

Then call up your local sanitation dept, and inform them that you don't want them to pick up your garbage anymore; you don't need the government to do "EVERYTHING" for you..."WAAAH." Tell the Sanitation Dept. that you're perfectly able to pile your own garbage into the trunk of your own car and drive your own garbage to the garbage dump all by yourself.

Then get back to us.

[dolphindance]

33. You're employing hyperbole. I'm just saying this is going a bit too far.

There must be a healthy balance between regulations and giving a private company breathing room to set its own destiny.

[PVnRT]

45. Breathing room? Like charging usurious rates, steep penalties and suchlike?

You know, the behavior they were engaged in long before this legislation was conceived?

[Name removed]

47. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Dr.Phool]

14. Another reason to shitcan Bernanke.

The Fed, as well as congress has the authority to stop the increases on previous balances for no reason.

Congress gave the banks a one year grace period to jack up rates. However, the Fed could stop their unfair practices immediately. Bernanke chooses not to.

[jeanpalmer]

22. The Fed and the government

will not do anything that negatively affects the banks. They're doing everything they can to reliquify them, and credit card holders will be required to do their part. Many banks, like JP Morgan Chase, get a large part of their revenue from credit cards; and credit cards are one of the few areas where banks can increase profit margins, because they can change the rate unilaterally and there is no limit currently on the rate.

Once the rate gets above 12%, credit cards are scams and public nuisances. And ought to be shut down.

[Freddie Stubbs]

34. President Obama just appointed him to a second term

[Hamlette]

18. Good. Maybe some people will think twice BEFORE running up huge debts.

I know some people need credit but the vast majority does not.

[brentspeak]

19. So what if someone doesn't have a huge debt, only a modest debt

but then that modest debt explodes into a huge debt because their card's interest rate was greatly increased?

[GOTV]

41. Sometime I wonder if it should be illegal to change the rate on debt already incurred ...

... it seems like breaking a deal.

I know that the ability to change the rate is technically part of the deal but it still seems unfair.

[ChiciB1]

64. Credit Unions Aren't Doing This... Glad I Have Access! n/t

[seabeckind]

28. Heard this argument a lot lately

I think it's the one the poor defenseless banking industry uses to protect itself from those gouging evil customers. Waah, it's all the fault of our cardholders cause they aren't responsible. Meanwhile they take another congressman on a junket and explain how much they are helping keep our economy afloat.

So if a guy can't make his monthly payment, what good does it do to raise interest and rates? I know he can't use the bankruptcy escape -- they closed that hole a few years ago.

So what do they gain? Indentured servitude? Yep.

[ejpoeta]

38. the funniest thing about that argument is ....

they actively pursued bad risk cardholders. they went out of their way to get college kids who didn't even have a job or anyway to pay the bills.... and now they want to blame those same cardholders who were given a credit card when they shouldn't have been. I remember all the credit card offers we got in the mail.... they went right in the trash!! currently we have cards attached to our banks... and a home depot card and a lowes card... which stay in the safe. bob took the lowes card today because our water stopped working last night and he discovered this morning it was the pressure switch.... this is the kind of thing we have the card for... we can fix the water and then pay off the bill when we have the money in the next month. we actively avoid adding debt to what we have.... i don't want to get sucked into that hole... then you spend all your money paying credit card bills and end up using the cards to buy groceries and stuff because you have no money after you pay the bill. arrgghhh!! no thanks. our goal is to get our house paid off in the next couple of years then we will have the car loan and can probably double down on the payments and get that paid off fast too.

[Hamlette]

44. exactly right! I should be able to buy expensive shit I don't need and let the evil bank pay!

I'm disappointed to see smart Americans who spend more than they should on stuff they don't need cry and moan when the bank wants its money back. Yes, it sucks that they send offers of credit cards to kids but the solution is to start teaching our kids they should not use credit and they should stop buying shit they don't need.

I am entirely sympathetic to people who use credit cards responsibly. Like the story on this post about the Home Depot and Lowe's cards. If those people get in trouble down the road, I do not want to see them hurt.

I have no sympathy for people who ran up credit card debt they could not repay for stuff they did not need. None. The bank should not have to pay for Fred's European vacation or new stereo system.

One of the most harmful practices is the teaser interest rate. O% for one year. The problem is, people see that and think they can get that thing they wanted and pay for it later not thinking they might get laid off. By then, the interest rate has gone up to 30% and they are screwed. But they screwed themselves.

If the credit card offer had said "30% interest from day one" they might not have purchased the unnecessary item in the first place. That is what the new legislation is forcing by not allowing an increase in interest without warning. Now credit card companies are charging a more realistic fee from the beginning.

[starroute]

21. Just 11.2%? I could only dream

Luckily I've been able to pay my Sears credit card bill in full every month recently, after having gotten burned once by letting balances run up over 20 years ago. I think I slipped up and was a couple of days late once in the last five years. Despite that, I received a notice with this month's bill saying:

"We are increasing your variable APR for regular Sears and External purchases. Your regular Sears and regular External purchase ANNUAL PERCENTAGE RATE will equal the U.S. Prime Rate plus 21.99%. As of July 1, 2009, this APR is 25.24%."

That's up from 17.24% last month -- which was already ridiculous -- but this is surreal.

The Sears charge card began as an in-store card, then became a general credit card but still managed by Sears itself. These days it's issued by Citibank, though.

At this point, I'm inclined to just stop using the Sears card the way I stopped using my previous Citibank charge card (which had started off as my husband's local bank card back in 1966) when that got too crazy. All it would take is getting swine flu or having a hurricane knock out power for three days or something to miss a payment and get hit by $50 or more in interest and late fees.

I'll have to see if the rates on my Target Visa card are any better. At least that's not Citibank.

[lunatica]

29. Wow! No one saw that coming!

Reminds me of what? Let's see... Oh Yes! Who could have thought that they'd use airplanes.........?

[mkultra]

30. Anything that drives consumers away from CC use cant be all bad.

[ProSense]

32. The OP is trying to create the impression that this is the result of the new CARD Act

The article opens with:

Help is one the way for struggling credit card holders. Starting today companies must give consumers 45 days notice of any rate increases instead of 15 days. Consumers can opt out and pay their balances off at the lower rate. Companies also must send statements 21 days before payment is due, instead of 14 days.

And ends with:

The new rules are designed to protect consumers. But before the strictest reforms take effect, consumers may find themselves more vulnerable than ever before.

[Mass]

36. It is. The House and Senate gave the credit card some time before the law applies.

They rushed to do these things before they were not allowed to do so.

And do not tell me that it did not happen. After 6 years of no incident of my credit card , my credit card rate was increased by 300 %. No reason given. Just because they still could. This said, I do not care as I always pay before the grace delay, but imagine somebody who use it to pay for immediate medical care and cannot pay back.

The reform made people more vulnerable for a time. Just as the article says.

[mkultra]

39. nothing is perfect

and progress is good. 300% huh? what did it go from and what is it now?

[ProSense]

43. You can complain that the law should have been made effective immediately, and

argue that the imminent changes made the greedy credit card companies rush to get all they can before the law changed, but the law does protect consumers from the credit card companies preying on them in this way. Just as the article says.






edited for clarity.

[mkultra]

49. yes but it wasnt perfect and a black president must be perfect.

[brentspeak]

51. 'Straw', meet 'man'. Oh, and 'race'? Meet 'card'.

"Now, you all of you just get to know one another; I have to go see how 'shame' and 'less' are doing. Toodle-doo!"

[Name removed]

57. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Lyric]

35. If we all stopped using our credit cards, it would send them a clear message.

Unfortunately, such an action would inevitably be subject to http://en.wikipedia.org/wiki/Free_rider_problem">the Free Rider Problem.

[GOTV]

42. I can hardly imagine doing without a CC

but I don't see the connection to the free rider problem which is usually connected to a public good or resource. How does it apply to the CC industry?

[mkultra]

50. wow, i never use my credit card

Its for emergencies only.

[GOTV]

52. I guess we all have different cutoms but ...

... but two things off the top of my head that I do a lot and CCs make convenient is: buy stuff on line and pay at the pump when I fill my car.

[mkultra]

56. i buy on line and use cash for gas

I use my bank card to buy on line though. That way i only spend what i actually have.

[GOTV]

59. Oh, then I guess we're more alike than I thought ....

... I use my bank card most of the time for the same reason. I don't carry a balance.

Although online I do use a credit card because they offer the ability for me to generate unique single use CC#s so that I don't have to worry if my CC info sneaks out of their database. My bank doesn't offer that service for my bank card.

[mkultra]

69. thats is an awsome service

But i got pissed at my CC company that offered that and instead just started using my bank card. My liability is limited to $50 by the issuer so i figure ill be fine.

[ChiciB1]

63. I've Stopped, But Know Many Who Are In DEEP Debt & Have No Where

to turn! As I stated above, my ex-sister-in-law has 2 cards and is freaking out! I told her "tongue in cheek" just don't pay them. She's 70 and doesn't even own her home! what can they do to her if she has nothing to take away??

Any suggestions?? I would love to help her out, but can't come up with the amount of money she needs! It's a LOT! And she SHOULD have known better than to charge so much, but her divorce cost her dearly! My brother-in-law is a CREEP!!!

[dkf]

73. Why does she live like that?

Debt is servitude.

[TwilightGardener]

53. My Crapitol One went up to 23% for no reason last year. Fuckers.

I've been paying it off every month just to poke them in the eye.

[prolesunited]

55. Have you called to ask for a promo rate?

They jacked up my Discover card for no good reason and I was able to get a lower rate. You do have to have a good credit score and payment history for them to do it, though. Worth trying.

[ChiciB1]

68. Didn't Work For Me... Chase Said It Didn't Matter & I Had A GOOD History!

I was lucky to drop them. I just wish there was some place that people in trouble could go for help because of this kind of debt. It really sucks that they are able to do this stuff!

[Doctor_J]

54. Hopefully these leeches will price themselves out of existence

When does the revolution start?

[girl_interrupted]

58. Credit Cards, Medical Bills, Guns, Usury..add them together and what have u got?

the dumbest credit card bill to ever come down the pike.

NO Caps on interest rates, and Guns Concealed in National Parks. Wooohoo!

Medical bills are the leading cause of credit card debt. So if you are elderly, sick, don't have the cash to keep up with your medical bills or the increases in cost of living while you are on a fixed income & have been using your credit cards to survive or if you are unemployed, out of cash, and without health insurance and are sick or a member of your family is, too bad for you!

And if you have been prompt in paying your bill, sorry, that doesn't count either, tough luck, you are getting an increase in your interest rates anyway.

However if you are a gun owner, you just hit the jackpot!

What a scenerio. Banks take our tax dollars to bail themselves out, then turn around and screw the very people whose money they are using.

It's Usury, it's Loan sharking and its a disgrace, that they are allowed to get away with it. But they are. Nothing has changed, well, unless you want to pack heat in a National Park.

[ItNerd4life]

61. The gov't screwed us on this one.

The law should have taken affect immediately.

It should have protected people from excessive rates.

It should have protected people from excessive changes to the rates.

[joeycola]

70. "A child could have seen this occuring" says the OP. He is right.

[and-justice-for-all]

71. Card holders close accounts and shred their cards amist rate hikes..nt

[OwnedByFerrets]

72. Happened to us this week....I'm devastated.

[ArnoldLayne]

75. I've had my Visa Credit Card since 1986 always made my payments

on time sometimes paid on it a couple of times a month. They sent me a letter saying they are lowering my credit limit from $3,000 to $2,000 my cash limit from $1,000 down to 0 and raised my interest rate from 15.99% to 19.99%.