Credit card holders livid about 'rate-jacking'
- One man's rate went from 9.5% to 16.99%: "It almost borders on loan-sharking"
- Citigroup, recipient of bailout funds, seems to be the target of most bloggers' ire
- U.S. House passes "bill of rights" for customers, but legislation stalls in Senate
- Citi says anyone unhappy with rate can opt out and close account when card expires
From Drew Griffin and Kathleen JohnstonCNN Special Investigations Unit
It arrived in Rich Stevens' mailbox a few weeks ago: the notice that Citibank had "rate-jacked" the Visa cards belonging to him and his wife. "In my case, from 9.5 percent to 16.99," the 54-year-old nurse from the Long Island hamlet of Merrick, New York, told CNN. And his wife's rate zoomed from 7.95 percent to 16.99 percent, he said. Stevens said he did not know why the rates had soared; his credit rating is great. But, like thousands of other credit card customers around the nation, he has been notified his rate is skyrocketing. "It almost borders on loan-sharking, from my perspective," he said. In the blogosphere, writers are livid at the instant rate hikes -- called "rate-jacking." Citigroup seems to be the target of most bloggers' venom -- partly because Citigroup issues so many credit cards and partly because Citi began sending the notices at about the same time it was getting a $20 billion, taxpayer-financed government bailout.
No one at Citigroupwould talk on camera to CNN about the matter. Instead, the company issued a written statement, which said: "To continue funding in this difficult credit and funding environment, Citi is repricing a group of customers." Citi told CNN that anyone unhappy with the new rates can opt out and continue paying the lower interest, but they must close their account when their card expires. It's all in the fine print. Rep. Carolyn Maloney, D-New York, said she is sick of the fine print. She agreed that credit card companies get away with whatever they want, as long at they put their desires into the fine print. "They have this provision that says they can raise the rate -- any time, any reason," she said. In September, Maloney got the House to pass by an overwhelming margin of 200 votes the "credit card holders' bill of rights," which would have stopped rate-jacking and the imposition of other fees by banks.
But the bill has languished in the Senate since September. "There's a lot of pushback from the financial industry," she said.
Critics say that pushback is linked to donations from the banking industry to the politicians responsible for regulating credit cards.
The chairman of the Senate Banking Committee is Christopher Dodd. His staff said the Connecticut Democrat has his own credit card bill containing tough language to stop things like rate-jacking and shortening of billing cycles -- two issues that anger consumers.
But even Dodd's own bill has failed to gain traction -- it has sat since July.
Dodd himself received more than $4 million from the financial sector during the last campaign, according to campaign records. His office did not respond to CNN's questions about that.
It did say that he has tried repeatedly to protect consumers, but added, "legislation has been met with stiff opposition by the credit card industry."
On Thursday, the Federal Reserve is expected to vote on its own new rules regarding credit cards, rules in the works for four years that could clamp down on rate-jacking.
Whatever is passed, Maloney said, probably would not take effect until 2010.
Find this article at: http://www.cnn.com/2008/US/12/17/credit.card.rates/index.html?eref=rss_topstories
I'm posting this story because Citibank has done the same thing to me repeatedly for two years. The first time, they jacked-up my rate to 35%. 35%?!? How is that even legal. Luckily, I called and complained because I had not gone over my limit, had not made any late payments, and the amount charged on my cards was only about 15% of the limit and they lowered the rate again. What if I hadn't been responsible though, what about in these difficult economic times where people are losing their jobs left and right and need credit to buy medicine, shoes for their kids, or dinner? Should they be forced to pay rates that should be considered criminal? More recently, as my debt has crept up again due my recent wedding which included a trip to Las Vegas, NV Citibank has once again jacked my rates up. What's most interesting is that I have two of the exact same card, which they have refused to merge into a single cards since I opened the account. Interestingly, there is a different rate on both cards. When I called and asked the rate to be lowered on one to meet the other, they indicated that I already had the lowest rate possible on that card. When I explained that I have another of the exam same card and provided my account number, they simply replied "oh, well there is nothing more that I can do". I would close the account, but I've learned my lesson doing that too...I once had a card in which the rate continued to climb, so I called and cancelled so that they couldn't raise the rate any more while I continued to pay it off. Let's just say, that doesn't work. They jacked-up the rate to the maximum. Anyway, as Citi is currently raising my rates for absolutely no reason whatsoever...again...I am using my lessons learned. I am transferring my balances to my local credit union who provides me with sane credit limits, low interest rates, and fair treatment...just as they always have. I'm doing my best to live within my means, pay down my debt, and continue to learn from my mistakes.