January 19, 2010
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News: Galvin Demands Credit Card Data
Seven of the U.S. largest credit card issuers have been given until January 26th to turnover information on interest rate increases. William Galvin, the Massachusetts' Secretary of the Commonwealth has asked the companies to provide information on any rate adjustment they implemented over the past several months. Galvin requested the information because several lenders have increased interest rates in anticipation of the enactment of the new Credit CARD Act 2009. The new legislation will limit lenders from arbitrarily raise interest rates and impose stiff penalties and fees. The seven credit card companies notified are American Express, Bank of America, Charles Schwab, Citigroup, Citizens Bank, Fidelity Investments, and Morgan Stanley.
Galvin sent a three page notice to the major broker dealers who issue credit cards either on their own or through an affiliated bank. The letter asked the companies to provide information on any interest rate or fee changes they made since May 2009. Additionally, the companies were asked to explain why the changes occurred. Galvin is looking for information detailing which cards were switched from a fixed interest rate to a variable interest rate and any other fee imposed on cardholders. In his letter, Galvin stated "Increasing fees and hiking rates on credit cards before the federal law fully takes effect in February goes against the intent of the Congressional act."
The Secretary believes that if the recent surge of abusive practices imposed on credit card customers proves to be tied to securities broker dealers, it has the potential to breakdown the high standards of "commercial honor and the just and equitable principles of trade." Furthermore, a recent study conducted by the Pew Charitable Trusts indicated that in July 2009, the average card interest rate ranged from 13 percent to 23 percent higher than in December 2008. When the companies were contacted, Morgan Stanley declined to comment; Fidelity said the company would be cooperating with the request; and Citigroup, Bank of America, Citizens, Charles Schwab, and American Express were not yet ready to release a comment.