Credit Card Fight
December 5, 2007
Recently, the Congress of the United States has begun to re-examine the credit card industry and how they do business with consumers. One issue that is being carefully reviewed is the practice of increasing a consumer’s interest rate when that person’s credit score goes down. This practice takes place even if the consumer has paid his credit card bill on time.
Consumer protection advocates as well some credit card industry critics suggest that this is yet another example of abusive and confusing credit card practices that only forces credit card consumers further into debt.
Sen. Carl Levin, D-Mich., chairman of a Senate Homeland Security and Governmental Affairs subcommittee, is at the lead of this investigation and he is making clear that he hopes the credit card industry will make changes voluntarily.
Levin recently stated that “Working people are being squeezed.” He called for “good, strong legislation” that he hopes will be enacted next year. “These abuses need to be remedied. We have some real momentum for reform.”
At a recent hearing, Senator Levin’s subcommittee, which has been reviewing the credit card industry, examined how credit-card issuers raise customers’ rates to as much as 30 percent, when the consumer’s FICO credit scores decline. This even if the consumer had paid the credit card bills on time.
Also, it was determined that in many cases consumers will given very little advance notice of the increased rate. The rate increases were automatically triggered by declines in credit scores for reasons that were not explained to the consumer.