Congress Takes Aim At Credit Card Policies

Lawmakers Threaten Legislation If Industry Doesn't Voluntarily Curb "Sky-High" Interest Rates And Fees

(CBS/AP)  An Ohio man whose $3,200 credit card debt mushroomed to $10,700 with interest and fees told his story Wednesday to senators, who denounced the industry for confusing billing practices and shifting interest rates.

Executives of three major banks defended their credit card practices as responsible and responsive to consumers' needs in testimony at the hearing of the Senate Homeland Security and Governmental Affairs' investigative subcommittee. Those from Citigroup Inc. and Chase Bank USA said their companies were eliminating some practices — including the one that hit Wesley Wannemacher of Lima, Ohio, with over-limit fees on his Chase card account 47 times although he went over his credit limit only three times.

The interest charges and fees on Wannemacher's account more than tripled his debt despite his having made payments averaging $1,000 a year over six years, noted Sen. Carl Levin, D-Mich., the subcommittee's chairman.

"Unfair? Clearly, I think," Levin said. He said an investigation by the panel found that "sky-high interest charges and fees are not uncommon in the credit card industry. While the Wannemacher account happened to be at Chase, penalty interest rates and fees are also employed by Bank of America, Citigroup and other major credit card issuers."

Richard Srednicki, the chief executive officer of Chase Card Services, apologized to Wannemacher in his testimony. "In this case, we simply blew it," he said.

Srednicki said the company has decided it no longer will charge over-the-credit-limit fees to customers who have been in a chronic over-limit position for 90 days.

Wannemacher used a new Chase card in 2001 and 2002 to pay for expenses mostly related to his wedding. He had $3,200 in purchases, interest charges of $4,900, 47 over-limit charges totaling $1,500, late fees of $1,100, for total charges of $10,700 as of February. He paid $6,300, leaving a $4,400 balance — which Chase agreed to waive after he contacted the subcommittee staff.

"Debt seems to invoke a feeling of hopelessness unlike any other problem I've encountered," Wannemacher testified at the hearing. "When a debtor calls you on the phone and you make a minimum payment, you know that you've made no real progress and that in a month, they will be calling again."

Sen. Norm Coleman of Minnesota, the panel's senior Republican, said high interest rates on credit cards, "hefty fees and crippling penalties impede more and more hard-working families from pursuing their American dream."

The problem is worsened by the "impenetrable" language of credit card disclosures provided to consumers, he said.

One hidden practice is called "universal default," reports CBS News correspondent Sharyl Attkisson. For example, say a person misses a car payment. That person's bank cards, even if unrelated, could use the missed payment to raise interest rates.

A similar chain of events happened to Bob Rolls, Attkisson reports. He charged $5,000 to a home improvement store credit card to buy materials to build a ramp for his 97-year-old father.

That purchase somehow triggered an incredible jump in the interest rate charged on his entirely unrelated Bank of America Visa — even though his credit is spotless.

"They said they were gonna raise my rate to 27.99 percent," Rolls said. "I said 27.99 percent. Forget it. I'm closing this account."

While the credit card practices in question are legal, Levin is threatening possible legislation to outlaw them as a spur to the banking industry for voluntary changes.

Senate Banking Committee Chairman Christopher Dodd and other Democratic senators challenged credit card executives at a hearing in January over rising late fees and other penalties and marketing practices they portrayed as predatory. Dodd, D-Conn., said he was putting the industry on notice that if it doesn't improve practices on its own, legislation may be warranted.

Since Democrats assumed control of Congress in January, they have put a number of consumer issues on the legislative agenda. With Americans weighed down by some $850 billion in consumer debt, the practices of the robustly profitable credit card industry are a compelling subject for scrutiny.

Citigroup, the nation's largest financial institution, announced last week that it was eliminating the practice of so-called universal default — raising interest rates for card customers because of their failure to pay other creditors on time. In addition, Citigroup said it would eliminate some types of interest rate increases that have been criticized.

Credit card issuers raise customers' rates and fees, for example, when they believe it is warranted by conditions in the financial markets. But under Citigroup's new policy, rates and fees will be increased before a card expires only if the customer pays late, exceeds his credit limit or pays with a check that bounces. If the rate is linked to the prime interest rate, it would rise or fall in tandem.

[miaoscar]

Chase did the same to me last year. I got a letter telling me what a great customer I was. They gave me a 4.9% rate and $15000 limit. I made them card of choice and once I reached $9600 they lowered my limit it $10,000 and interest rate to 34%. Then let the games begin. They called me every day for three months, multiple times a day from numerous phone numbers. They told me they would not stop calling me everyday until it was completly paid. I am done to $5000K but when will it stop. The extra interest charges, late fee. over the limit fees aer out of sight...then of course, all other accounts attack you too....even when you are not late or owe then anything.....

[enery-2009]

I recently received a notice more than doubbling my interest rate on a Capital One credit card. I always pay off my debt monthly and do not carry over a balance.

[bobebenson]

I'm really glad I read this post because BobEBenson's testimonial says it all. The next time I get a Capital One piece of junk mail I'd like to shove it down the CEO's throat.
Posted by standlee5 at 11:59 AM : Mar 08, 2007


standlee5.. don't bother shoving it down his throat, just tear off your mailing address from the offer and then stuff all the rest into the pre-paid envelope and let THEM pay the postage for it! Hits 'em where it hurts (the pocketbook!) and helps out the Postal system too! :-)

[godi70]

A Federal Office told me to do this question to the Department Of Insurance, Securities & Banking:
In Washington DC what is the maximum allowed APR and finance charge by credit cards. D.I.S.B. never had giving a satisfactory answer.

All began when I called the Bank of America questioning why they had increasing my credit APR to 25.99% with a %u201CFinance charge%u201D of $155.57 dollars.

Why the credit cards companies have the right to create thousand of APR and Finance charge different?
Credit card were created to use in place of cash and the user must pay interest for this money. Naturally that should be a human consciousness charge and not an abuse like happens today. In especial when our salaries in relation with the real cost of life is so lower.
I use credit cards and pay every month religious my obligation and not the minimum, my records by the three credits control companies are over 720.

Then who control this business in America?

[bellal-2009]

The problem is worsened by the "impenetrable" language of credit card disclosures provided to consumers, he said.


Really, who can make sense of that stuff. I can't believe it's taken Congress this long to take on the Credit card cos. Let's hope they regulate them heavily.

[dgavigan]

Oh, have I ever been there. My husband and I were working 2 jobs each to keep up with interest payments on debt both of us incurred prior to our marriage. We did nothing for fun unless it was free, and everything was paid for in cash, and cash only. This went on for around 4 years. We've since purchased our home, a car, and have the luxury of not living hand to mouth. We still work the 2nd job, but that is just for fun money, not for paying bills. It is possible to get yourself out of debt. Hard work and persevernce are a start. Making consistent payments, we worked with a management company. Our credit rating was horrible, we couldn't even get secured credit, now, my FICO score has more than doubled since the situation started.

[anopinion1]

For some reason i don't see credit card companies producing the richest people in the world????

If you wanna do something about a company attack walmart....They have produced what is 4 of top 10 richest people in america??? for some reason i think they are a bigger problem.

[chinoisyen]

It's about time congress looks into this "legitimate" loan shark practices. Republicans are to blame too for its greediness by supporting the lobbyist. Lets sue all these credit card companies.

[anopinion1]

homespunlady

how do you link i would want the prisons emptied to this topic/??
morals??
they INVENTED the credit card and everyone know that unless it is an absolute emergency(unlike the guy in this story charging 3k bucks to a credit card rather then going to a bank and taking a few extra days to get the money)you do not charge things on the credit card that you dont plan to pay at the end of the month when you get the bill.
they CHOOSE to get the credit card and know the risks.

yea cbscrash fight club was an awsome movie the credit cards funded everything they did then they wiped out their debt and everyones to go with it.

Congress should hand head in shame - they have the opportunity to look at this problem for years but there was an opinion they should not tinker with the banking business especially credit card vendors. Then came bankruptcy changes and again the laws were amended to favor the credit card companies.

Much of the problem lies with the greedy public who is anxious to spend to the max but are hesitant to pay to the min. College students are surely bright enough to recognize or ask a few questions from others about the inroads of obtaining a credit card - the pure knowledge of if you purhase you have to pay - whether the credit card later or the merchant now.

Congress should regulate the fees and methods of changing credit card interest rates to eliminate the inexcuseable treatement doled out to some credit card holders for only being late one day. A friend moved in June 2006 - post office did not forward mail even though all the requests for change of address were filed at the local post office - credit card statements were mailed but not received for over two months - even though payment was caught up immediately, credit card company changed rate from 8.99% to 24.99% - however they did rebate the late fees. No amount of explanation was adhered to.

More people should be educated on credit card liability - many times the credit card is a financial blessing in time of need of necessary large purchases or payments. Just read what you sign up for.

[standlee5]

How can ANY member of Congress read BobEBenson's post and not do something to stop this mafia mob of credit card companies. I'm really glad I read this post because BobEBenson's testimonial says it all. The next time I get a Capital One piece of junk mail I'd like to shove it down the CEO's throat.

[standlee5]

Bank fees and credit card interest rates need to be regulated along with payday loan sharks. Shut those places down.

[homespunlady]

According to anopinion1 's opinions if it can be done and gotten away with then it's acceptable. Obviously, based on that idea we should empty out all the prisons and save all those taxpayer dollars for the rich to buy security.
The question concerning these predatory lending practices is WHERE ARE THE MORALS?
This country DOES NOT REQUIRE basic financial knowledge to graduate from school. No Child Left Behind is more comcerned about whether our children are capable of running a cash register than if they can recognize these sort of con men. So, between the media brainwashing techniques I learned in MBA classes and the dumbing down of the great majority of our population this country is setting itself up for a very sad ending.
Most religions condemn the practices these companies are engaging in but apparently having a conscience is not something a nonhuman entity like a corporation worries about. The people that run these corporations need to be held personally responsible to ever get any moral sense back and the children of the US need to be taught common sense which the public school warehousing system seems to have forgotten.

[standlee5]

The cost of our health inssurance has tripled, our property taxes have quadrupled, homeowners insurance has tripled and car insurance has also risen. Our wages have not, in fact they may have declined slightly.

[Syndicate]

Ever see "Fight Club". This is how I would like to see the credit card companies dealt with. Perhaps a hacker out there could do us all a favor and delete thier finacial records. While your at it take out the customer database too.

They also need to go after the banks. I know people who have to pay to get thier checks cashed at the bank that issued the check. Let me clarify. My employer writes a check from his account say he is with bank of america. I receive the check and try to cash it at Bank of america. They tell me since I don't have an account it will cost me a few dollars. Even though the boss has an account AND the check was ISSUED BY THEM!

[lanaedawn]

I wish they would also prevent credit card companies from soliciting business on college campuses. I got 2 credit cards with $1000 limits my freshman year of college from filling out a form and receiving a 'cool t-shirt' or water bottle (all i really wanted was the free prize you got for filling out some information). Well after spring break and girls' nights out they were maxed out and I was already in debt. College students for the most part are not equipped to deal with credit cards, nor should they have these offers pushed in their faces as they are walking to class.

I'm also very tired of being charged to pay my bill online or over the phone. And sometimes that is not found in the fine print. I always call and check if there will be a charge to pay my bill any way other than mailing it in. These people are incredible with their outright thievery.

[vellwanger]

This past year The Dept of Labor has issued debit cards for people who are receiving unemployment. These cards are used to retrieve their monies. The only way that the unemployeed person can retrieve their benefits is by going to Chase bank or an atm. The ATM are charging $1.50- $2.00 per transaction for these cards. There are some ATM's that don't charge but you have to seek them out. In rural areas that is difficult to find. With the cost of gas you would have to drive distances to find that ATM. Do the math-- how many people are unemployed? Multiplied by the fees charged by the bank on a weekly basis. Why would the government take more money from the poor people and give to the banks. There is something wrong with this picture.

[planotiger]

Hey anopinion1, great attitude. Sound like a good republican - I'm doing fine so SCREW everybody else.

[bobebenson]

About 5 years ago, Capital One did me a great favor..they made me MAD!! My payment was due on the 10th, and I sent it on the 4th. Next month, a $30 late fee! (They claimed it got posted on the 11th). I set my online auto-pay to send it on the first. Two months later I get another late fee $30 please. I looked at the bill and they had moved the due date to the 6th! I set my auto-pay for the 25th...the due date gets re-set to the 1st! It finally got to the point where I made a payment on the 15th. The next month, you guessed it, a DOUBLE BILL AND A $30 LATE FEE! When I called to complain, they told that my payment arrived too early and was credited for the previous month! I started using all the "0% on balance transfer" offers and used them to sstart paying off all of my credit cards. When the offer expired, I would just use a different one fron the pile I was getting every week. I'm now down to one card that I use to make purchases of cameras etc...it's easier to get your money back if something goes wrong with it.

Guess what card ISN'T in my wallett!

[grumpas]

This is one more area that the Republican's have allowed big business to run unregulated and we are seeing the results. That is the Republican's favorite thing to do is deregulate so business can rape the consumer at will. But, at the same time a lot of American's have no concept of how to manage their money. When you don't have the money you should not be spending. But, they suppliment their low paying job with a credit card. Which is the worst thing one can do. If you keep adding to the debt monthly and only make minimum payments you dig a whole and bury yourself in it. The hottest thing in my area are the payday loan places. It seems like there is one on every corner in town. That is another area I look for their to be a lot of major problems with people in. When I was young if we didn't have the money we did without. But, so many these days don't do it that way. That's where they wind up in deep financial trouble!