January 5, 2010
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News: CT St Attorney Asks FRB To Take Action
Connecticut's State's Attorney has no intentions on easing up on credit card companies who continue to impose unfair and abusive practices against American. Rumor that credit card companies are planning on raising interest rates and fees for all cardholders to make up lost revenue from record breaking high card defaults motivated Richard Blumenthal to call the Federal Reserve to take action. On Monday, Blumenthal sent an appeal to Ben Bernanke, Chairman of the Federal Reserve Board (FRB) asking that the board exercise its powers of intervention. Blumenthal wants the FRB to force credit card companies to roll interest rates back to those of a year earlier in January, 2009.
New legislation, the Credit Card Accountability and Disclosure Act, signed into law last May will become effective February 22, 2010 and will ban unfair practices which include raising interest rates on existing card balance. Speculation is that financial institutions have been raising interest rates and fees ahead of the new law's enactment. Blumenthal has been a strong consumer advocate in past as well and maintains that the FRB has the potential to help credit card consumers find relief from the abusive practices of the financial industry. However, they have yet to acknowledge Blumenthal's request and have declined to comment.
In defense of the credit card companies, Edward Yingling, Chief Executive Officer of the American Bankers Association did acknowledge that interest rates have increased significantly during the past year; however feel they were merely responding to the economic environment. Yingling said that overall card issuers suffered over $90 billion in defaults from individuals who have not upheld their credit responsibility. As a result, Yingling says that banks have no alternative but to limit credit availability or increase rates and fees. Since lenders have chosen to continue making credit available, they are left with pricing for risk and increasing interest rates. The new law will prevent lenders from raising interest rates or fees on those higher risk consumers for a long period of time.