This is an article by Pamela Yip of the Dallas Morning News addressing the responses being touted by the banks which, in my opinion, are nothing more than just a couple of displays of basic decency that has been lacking for way too long. They should have never allowed additional credit history to affect the rates of credit cards as long as the payment history was acceptable in the first place.
When I see the banking regulations in place that should have addressed the industry abuses long before now, I will actually have cause for celebratory cheers.
Credit card companies pushed to change
07:39 AM CDT on Monday, March 12, 2007
Credit card companies are starting to feel the heat from Congress.
Democrats, aiming to fulfill their promise to improve the financial lot of average Americans, have cast a sharp eye at the lending practices of financial institutions, particularly in the area of credit cards.
"The credit card industry thrives on the confusion and powerlessness of consumers to both nickel-and-dime the average cardholder and to commit highway robbery of anyone who slips up even in the slightest," said Sen. Carl Levin, D-Mich., chairman of the Senate Permanent Subcommittee on Investigations, which held a hearing last week on credit card practices.
Credit card issuers are taking notice – and action.
Citi Cards said recently it's ending "universal default," the policy of increasing your interest rate if it discovers any late payments on your credit report. It didn't matter if you'd never made a late payment to that particular credit card company.
Citi also said it's doing away with "any time, for any reason" increases to the rates and fees of its cardholders.
Chase Card Services, meanwhile, has announced its "Clear and Simple Initiative," which includes expanding its program of contacting cardholders having financial problems and recommending options to solve their problems. The bank also said it's studying ways to make its disclosures clearer.
"We are both looking at our practices and looking at public perception and what our customers are saying about things," said Paul Hartwick, Chase spokesman. "We thought this was the right time to take a look at how we could be more clear with our customers."
Chase also plans to offer online payment calculators to help customers understand how their credit card payments will affect their account balances over time. It's reminding consumers about their ability to get free online alerts to help them stay current on their card payments.
Capital One boasts that it has "never had a universal default policy."
"There is only one circumstance in which a customer might be subject to default repricing – if they pay us more than three days late twice in a 12-month period," John Finneran, general counsel for Capital One, told Congress. "The decision to reprice is not automatic. For many customers, Capital One often chooses not to do so. If we do reprice someone for paying late twice, we will let them earn back their prior rate by paying us on time for 12 consecutive months."
Credit card issuers traditionally have taken the position that they can increase the rates and fees of a cardholder's account at any time for any reason for things as nebulous as "general conditions in the financial markets."
Under Citi's new policy, the bank won't increase the rates and fees of a card account until the card expires and a new card is issued, which typically is in two years.
The company said now it will hike rates and fees before a card expires only if you pay your bill late, exceed your credit limit or pay with a check that bounces.
Another exception is if the prime rate moves up. Most variable-rate cards are tied to the prime rate.
"We believe that making changes to what have been – until now – basic credit card practices is proof of our ongoing commitment to put our customers first," said Vik Atal, chairman and chief executive at Citi Cards.
Yeah, right.
The only reason card issuers are doing all this is because they can smell the scent of tougher regulation on their heels. They frame it as wanting to remain competitive in the marketplace – what they're really doing is realizing that Congress is listening to consumers who are fed up with the heavy-handed tactics of credit card companies.
"The industry is sensitive to congressional needs," said Ken Clayton, managing director of card policy at the American Bankers Association. "It's also sensitive to the marketplace. Clearly, the hearings bring a greater focus on some of these practices and the industry response to it."
Consumer advocates haven't been impressed with the credit card companies' actions.
"So far, many of the proposals center around providing more consumer education, greater disclosure and are Web-based," said Norma Garcia, senior attorney at Consumers Union. "These changes, however, are no substitute for the real reform consumers need to make the marketplace fair. What good is it to tell consumers in a more clear fashion that your company engages in unfair practices when what really needs to happen is to stop engaging in the practices in the first place?"
Credit card companies also needed to clean up their act on their own, not just after politicians and regulators started breathing down their necks.
"Congress is finally taking a hard look at the credit card industry," said Ed Mierzwinski, consumer advocate in the Washington office of the Texas Public Interest Research Group. "The industry is simply taking minimal prophylactic steps to deter actual reform legislation and protect the most profitable form of banking – credit card banking."
The buzz over credit cards comes at a time when the issue is starring in the movies: Maxed Out, a documentary now playing at the Inwood Theatre at 5458 W. Lovers Lane, is about how easy it is to fall into credit card debt and the sometimes tragic consequences.
Some credit card executives should buy a ticket.
No comments:
Post a Comment