Credit Card Cleanup
December 17, 2007
Some of the nation’s largest credit card issuers were in the hotseat recently as they faced probing questions about some of their practices. Executives from Bank of America, Discover Financial Services and Capital One appeared before Congress to explain their practices
Senator Carl Levin chaired the subcommittee on investigations and was not shy in asking probing questions of the credit card executives. One of the Senator’s main points was the complexity of the credit rating system that is being used by some companies in order to raise interest rates on certain card holders.
Much discussion revolved around how and why some credit card companies are raising interest rates on some customers even though those same customers had paid their bills on time and had not exceeded their credit limits. At issue was whether or not it was fair for credit card companies to increase interest rates using data from other sources as their reason for the increase. For example, if the customer’s credit score decreased for some reason, was that enough cause for a credit card company to increase that customer’s interest rate even though the customer had not made any late payments with the company.
Another sticking point was the often confusing opt out process that some companies are using. Some credit card companies are sending out literature to consumers telling them that they are going to increase their interest rates unless the customer opt’s out of the card within a certain amount of time. The snag is that if customers of some companies do not opt out in time the new increased rate will be applied to any previous balance, even if the customer does not make any additional charges to the card.