August 19, 2009
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Weathering CC Weather, Pt.1
Lenders take advantage of open window.No one should be surprised. Shocked, but not surprised. With the passage of Congress' 'Credit Card Accountability, Responsibility and Disclosure Act" several months ago, a window was opened. One of the provisions in the bill were prohibiting 'Retroactive interest rate increases'. Since the enforcement of this provision won't go into effect until February of next year, the window of opportunity for the credit card lenders to jack interest rates is open until then. So, what we are seeing right how is a scramble for credit card lenders to "get what they can now" before the bill goes into effect.
All across the country, we're hearing accounts of major credit card lenders tripling credit card finance charge rates within the course of only two months. They seem to be topping around 29%. Think of that -- you will have to pay an extra almost $1,000 just to borrow $3,000 for a year. That's a pretty-extreme way to treat a well-behaved and responsible card holder. It's not about the behavior of the card holder any more. It's about the behavior of the lender.
In a typical scenario, a Cape Coral resident had his credit card APR (annual percentage rate) jacked from 9% to 15% as a routine annual adjustment. The reason also stated that this change was not because the card holder had done anything wrong. The notice of the changes were received in a letter which stated that the new rates would be automatic by default If the card holder did not respond to decline them. A phone number was provided (also automatic-response recording) that indicated any decline in the rate increase would only hold so long as the borrower never used the card again. He could continue paying the card off at the lower interest rate unless he ever used the card again. If he did, then the interest rate would jump up to the higher rate.