Bank of America Won't Hike Card Rates
Wednesday, October 7, 2009
Bank of America said it will not raise credit card interest rates before February, when a law restricting industry practices takes effect, unless a cardholder is in default.
In a letter sent to Sen. Christopher J. Dodd (D-Conn.) on Monday, John Collingwood, the bank's director of federal government relations, wrote that the bank was making the change "in light of the concerns expressed to us by our customers."
Betty Riess, Bank of America spokeswoman, said on Tuesday that the bank will continue to change interest rates on customers who are late on two or more payments.
Several card companies, including Bank of America, have sparked outrage on Capitol Hill in recent months for raising rates and fees even on customers who pay their bills on time. The law that President Obama signed in May will prevent card companies from increasing rates on existing balances unless the cardholder is at least 60 days late making a payment. If a cardholder pays on time for the next six months, the old rate must be restored. Several other provisions require better disclosure of a card's terms and conditions.
Most of the provisions go into effect in February, but Rep. Carolyn B. Maloney (D-N.Y.), chairman of the Joint Economic Committee, and Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, have proposed a bill to move the effective date to Dec. 1.
Dodd, co-author of the credit card law, called on other card companies to follow Bank of America's lead. "Every other credit card company should follow suit," Dodd said. "This Congress has made it clear that abusive credit card practices are no longer acceptable."
A Chase Card Services spokesman said the company would proceed with plans to comply with the law on the effective date. Pam Girardo, spokeswoman for Capital One, said the company has already "been in full compliance" with the law in terms of not changing terms unless the cardholder is in default. Spokesmen at other banks that could be reached would not comment.
Travis B. Plunkett, legislative director for the Consumer Federation of America, said he appreciated Bank of America's response but that "Congress is going to have to move up implementation of the law to make sure that all rate increases that violate the spirit of the law come to an end."