November 30, 2009
-
News: BofA Sends Out Simple Letter
Bank of America is leading the way as the giant credit card company prepares to send out a lengthy letter to its customers outlining in simple language new terms and conditions. New credit card reform legislation mandates that lenders act in this manner; however, the law does not become effective until February 22, 2010. Bank of America will be ahead of the game by complying with this provision of the new law nearly three months early. The bank will be sending the letter out this week to the more than 40 million credit cardholders. The letter will outline the details of the account's interest rates, balance transfer fees and conditions, cash advance fees and conditions, annual fees, transaction fees, and late payment fees. According to the Associated Press, the letter will clearly state that if the customer is late on payment, interest rates will be affect and increase.
After the signing of the new credit card reform law, banks took advantage of the time given them to prepare for the changes to further their profits by raising interest rates, cutting credit limits, and imposing new predatory fees. It is estimated that over 65 percent of all credit card accounts have been affected by the additional attacks. Bank of America is no exception and they have participated in activities that the new law prohibits. The most significant change made by Bank of American, as well as other lenders, is a switch from a fixed interest rate to a variable rate. Banks found a loophole in the new law whereby a variable rate allows banks to raise interest rates without notice as the prime rate increases. The new law will prohibit banks from raising the interest rate on fixed rates unless the customer becomes two months delinquent.
According to Rick Struthers, President of Bank of America's Global Card Services, credit card consumers want to see in simple language what they are signing up for. The bank's aim is to provide that simplicity to consumers to help improve financial responsibility. The letter makes it very clear that it does not replace the long cumbersome account terms and conditions which can often be up to 40 pages long. The letter does not address one condition of new legislation and that is that lenders must provide information on how long it will take the consumer to pay off his card debt with different payment amounts.