October 13, 2009
-
News: Discover Pledges Not To Raise Rates
Most credit card companies have announced interest rate and fee increases over the past several months. Speculation is that they are trying to get the jump on the new credit card reform law that will become effective in February 2010. Recently, David Nelms, Discover Financial Services' Chief Executive Officer released a statement that the company would not be following the path of those other lenders by raising credit card interest rates and fees prior to the implementation of new regulations. Discover, one of the top lenders in the nation, does admit, however, that they have previously changed some terms with a select number of customers. An interesting statement since I have been previously information by personal acquaintances that immediately following Obama's signing of the new law Discover did indeed raise interest rates.
It's confusing to say the least since the credit card company announced earlier this year that they were making adjustments in interest rates by repositioning over 2 million accounts from a fixed to a variable rate. The new legislation will restrict raising interest rates; however, lenders didn't waste any time finding a loophole. The law applies to fixed rates and not variable rates. As a result, nearly every major credit card company has since switched all accounts to a variable rate. Discover maintained that the changes were in response to the current economic conditions and the increased business costs.
Discover Financial Services is one of the nation's top lenders and has an estimated 49 million open accounts. Mr. Nelms' statement was released the day after lawmakers sent out a plea to the nation's financial leaders asking them to halt any plans to increase rates prior to the implementation of the new legislation. A few provisions of the new Credit Card Accountability, Responsibility and Disclosure Act of 2009 have; however, the majority of the provisions are scheduled to be enacted on February 22, 2010. A bill that is currently circulating in the House and Senate would move that date to December 1, 2009.