A number of consumers say they have received written notices from their credit card issuers changing the terms of their account – whether it is a higher interest rate, a larger fee for balance transfers or a greater charge for cash advances.
The reason behind these actions? According to Senator Christopher Dodd, chairman of the Banking Committee, some credit card companies are racing to hike rates before the new credit card reform legislation takes effect in February 2010.
For Americans with credit card debt, a higher interest rate can significantly increase the total amount of their loan if it is paid back over several months.
In the interest of protecting these consumers, Dodd has written a letter to Federal Reserve chairman Ben Bernanke to request the regulator keep an eye on issuers that have been raising interest rates.
He asked the Fed to enforce a provision in the new credit card rules which states that companies must review every six months any account where the rate has been increased since January 1, 2009.
The provision also requires issuers to lower a customer’s rate if it is determined the individual has become less of a credit risk or other circumstances indicate the higher rate is no longer necessary.
Dodd wrote that “experience has shown we must maintain vigilant watch to protect the financial interests of the American people.”
Consumer advocate Adam Levin recently told the Associated Press that the Credit CARD Act means “people can start to feel a lot more comfortable about the rules of the game.”
However, he also cautioned that “there will be some fallout – and it might be a short-term negative.”
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