Credit Card Companies Jack Interest Rates, Lower Credit Lines & Credit Scores

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Should the same banks that got billions of taxpayer bailout dollars be allowed to jack interest rates, reduce available credit lines and severely damage consumer credit scores in the process?  That is what's happening!

Last December the Federal Reserve Board passed new rules to prevent credit card companies from raising interest rates on already borrowed money. Trouble is, these new rules don't go into effect until mid 2010, giving credit card companies plenty of time to harm consumers.

Please take a moment to tell Congress to support the Credit Cardholders Bill of Rights - S. 236 and HR 627. 

This bill would both speed up the implementation of the Federal Reserves rules (not set to go into effect until July of 2010) and add a few more necessary protections for cardholders.

Credit card companies have been systematically lowering consumer credit lines and that costs consumers money!  Why is it costly to consumers? Because by reducing available credit it appears as though a consumer has incurred more debt -and in some cases, maxed out their credit cards. And when that happens -credit scores are negatively impacted. And along with lower credit scores comes higher interest rates and yes, steeper insurance premiums! See my SunSentinel blog;  "How credit card companies are ruining your credit score and contributing to our economic malaise".

Congresswoman Carolyn B. Maloney (D-NY), Chair of the House Financial Institutions and Consumer Credit Subcommittee has reintroduced the Credit Cardholders' Bill of Rights Act in the House as H.R. 627.

Here's what the Credit Cardholders' Bill of Rights Act calls for:

• Prevent card companies from unfairly increasing interest rates on existing card balances - retroactive increases are permitted only if a cardholder is more than 30 days late, if a pre-agreed promotional rate expires, or if the rate adjusts as part of a variable rate.

• Require card companies to give 45 days notice of all interest rate increases so consumers can pay off their balances and shop for a better deal.

• Prevent companies from charging "over-the-limit" fees when a cardholder has set a limit, or when a preauthorized credit "hold" pushes a consumer over their limit.

• Limit (to 3) the number of over-the-limit fees companies can charge for the same transaction (i.e. for obtaining a cash advance, making a late payment, exceeding the credit limit on an account) - some issuers now charge virtually unlimited fees for a single limit violation.

• End unfair "double cycle" billing - card companies couldn't charge interest on debt consumers have already paid on time.

• If a cardholder pays on time and in full, the bill prevents card companies from piling additional fees on balances consisting solely of left-over interest.

• Many companies credit payments to a cardholder's lowest interest rate balances first, making it impossible for the consumer to pay off high-rate debt. The bill bans this practice, generally requiring payments to be allocated proportionally to balances that have different rates.

• Among other measures, requires card companies to mail billing statements 25 calendar days before the due date (up from the current 14 days), and to credit as "on time" payments received by 5 p.m., local time on the due date.

• Establish standard definitions of terms like "fixed rate" and "prime rate" so companies can't mislead or deceive consumers in marketing and advertising.

• Give consumers who are pre-approved for a card the right to reject that card prior to activation without negatively affecting their credit scores.

• Prohibit issuers of subprime cards (where total yearly fixed fees exceed 25 percent of the credit limit) from charging those fees to the card itself. These cards are generally targeted to low-income consumers with weak credit histories.

• Prohibit card companies from knowingly issuing cards to individuals under 18 who are not emancipated minors.

And most importantly, unlike the Federal Reserve rules, HR 627 wouldn't wait to go into effect in July 2010!

HR 627 calls for these rules to take effect within 3 months of the President signing the legislation into law.

It's time to hold credit card companies accountable!

Take a minute to tell Congress we need real credit card reform and we can't afford to wait until mid -2010!

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Will this new bill have a retroactive effect - - meaning, will a credit card company that increased interest rates on an account that was one day late within the past year, have to revert that account back to its original interest rate?

Credit Cardholder's Bill of Rights that the House passed this week, does not include a retroactive effect. Some highlights of the rights include;

Customers must receive 45 days notice before interest rates are increased -this provision goes into effect in 90 days

These other provisions don't go into effect until next year! July 2010 these will go into effect;

Prohibits retroactive interest rate increases on previous card balances

Prohibits double-cycle billing

Banning fees when making payments by phone or online

However, there is a Senate Bill that would include stronger protections to curb abusive practices that you can urge your Senator to support along with timely action. Waiting a year for these protections leaves consumers wide open to predatory credit card practices.

Sen. Dodd’s Credit CARD Act bill S414 -Credit CARD Act would:

Eliminate "retroactive" rate increases, where an issuer increases the interest rate on existing credit card balances;
Eliminate "universal default," where an issuer raises interest rates because of something other than the cardholder's performance on that card (for example, making a late payment on a different credit card);
Require that payments are allocated first to the balance with the highest interest rate; Mandate that penalty fess be reasonably related to costs, and
Limit aggressive marketing, and irresponsible lending, to young consumers without the ability to repay debt.

Does any member of Congress support passing a Federal anti-usury law that would cap the rates credit card companies can charge? and advocates are fighting AGAINST a bill currently in Congress. It's called the "Payday Lending Reform Act," but AFFIL has dubbed it the "Payday Lender Protection Act." H.R. 1214 actually allows payday lenders to charge 391% APR on their loans. I think 36% interest is too high, let alone 391%!

Read more about HR. 1214 at AFFIL here:

and then use their "Take Action" link and send letter to your reps.

Congress should go back to the days of Usury laws where greed isn't allowed to flourish!

Denise, what good is this bill if the credit companies have already jacked up your interest rates to almost 30 percent? We were late on NO paymnents, but contractural clauses (Discover) allowed them to increase the interest rate to ridiculous amounts. Are those of those that have already been hit a "lost cause"? Thanks for the web blog!

Tom -I totally agree with you.
Many of us believe the credit card companies simply saw that reforms were coming -and knew they needed to spike rates to beat the legislation...and boy did they! And though all the hullabaloo the cc companies raised -about fighting reforms, I believe they knew it was nothing they weren't prepared for.

But having said that, this bill will do some good things down the road. One day they will all be competing again and those that want our business will need to compete for it -let's hope that day isn't too far off as so many people are struggling.

Some good things include:

• Prohibiting credit card companies from raising interest rates on money already borrowed unless it was borrowed on a variable rate card, or the minimum payment is made more than 30 days late.

• Protecting new cardholders by prohibiting interest rate hikes in the first year of an account. The only way interest rates can go up in the first year is if the card issuer disclosed a future rate hike at a preset time when the account was opened.

• Imposing a new rule that "zero interest" really means zero, ending the practice of so-called deferred interest.

• Prohibiting credit card companies from charging a late fee if the cardholder’s bill was mailed out less than 21 days before the due date.

• Requiring that payments be allocated fairly among credit card balances with different interest rates. Payments must either be allocated to the highest interest balance or prorated.

• Prohibiting credit card companies from charging interest on amounts already repaid, through two-cycle billing.

• Restricting the financing of fees on credit cards where the fees or deposits use up the majority of the available credit on the account.

Is it going to stop them from gouging consumers -no! Credit Unions are looking pretty good, they being non-profit can't charge the 30 and 35% interest rate the credit card loan sharks are now charging. Maybe we should change our banking practices and avoid the major players until they play fair. Usury laws need to show a come back! Thanks Tom!! Denise

I demand a reevaluation of the old credit rating model to produce Consumer Credit Scores! As credit card companies are trying to limit their liabilities, they cut the credit limits, thus increasing debt to credit limit ratios, which are severely affecting Credit Scores!

A consumer is a looser in this fraudulent practice, while credit card companies and banks are on their way to prosperity! I worked very hard to earn a good credit rating and my overall credit score. I feel absolutely helpless in trying to retain a good credit standing.

Please mandate credit card companies and banks to freeze available to be borrowed credit amount headroom if they wish, it is fine with me, but do not allow them to cut the credit limits, thus adveresly affecting Credit Scores and Ratings!!! This does create a domino effect and subsequently will raise current interest rates and ability to utilize available credit, which all of these credit card companies and banks were absolutely luring and urging existing and new customers to use!!!

I would like to see card companies be held criminally liable for purposely making decisions that have a knowingly negative impact on consumers, and their credit scores, without justification. In this case justification would mean defaulting on an agreement. Whether that agreement be not paying, not paying on time, or overspending.
With the new investment laws a company is required to act in the best interest of its customers, and card companies should be held to the same standards. If I am having my lines of credit cancelled by the banks because I have "too high of a balance for too long" I am being punished purely for being a consumer of their product. Not only did I act according to our agreement, but I acted in a manner that profited the company. Instead of being rewarding, I am being penalized by the company, and their actions have negatively impacted my livelihood as well as my credit score.

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