Credit Card Execs On The Hot Seat

On Capitol Hill, Industry Leaders Defend Hiking Rates When Credit Scores Fall

(CBS/AP)  Credit card executives on Tuesday deflected congressional criticism of their practice of using falling credit scores to charge customers higher interest rates.

Industry critics say it's another example of abusive, confusing credit-card practices that can push consumers deeper into debt.

Sen. Carl Levin, D-Mich., chairman of a Senate Homeland Security and Governmental Affairs subcommittee, said customers who consistently pay on time are getting whacked by credit-card issuers that raise such rates without an adequate warning or a clear notice.

"The bottom line for me is this: when a credit card issuer promises to provide a cardholder with a specific interest rate if they meet their credit card obligations, and the cardholder holds up their end of the bargain, the credit-card issuer should have to do the same," he said Tuesday.

One purpose of today's hearing was to try to embarrass the companies into voluntarily changing their policies, reports CBS News correspondent Chip Reid. If they do not, some senators said they will try to change the law.

In part due to pressure from the Senate investigation, three big credit-card companies - Citibank, Chase and Capitol One - said they won't be raising interest rates for people who pay their bills on time, reports CBS News correspondent Bob Fuss.

But executives from Bank of America and Discover Financial Services told the subcommittee that a credit score is one of several factors in determining whether to increase a customer's interest rate.

"It's important criteria for how to manage risk and pricing," said Roger Hochschild, Discover's president and chief operating officer.

Bruce Hammonds, president of Bank of America Card Services, said his bank also considers customer behavior on an account and their debt to others, in addition to credit scores.

But it's the behavior of credit-card issuers that prompted several consumers to testify before Levin's subcommittee about not being informed when their rates were hiked.

Janet Hard of Freeland, Mich., said her Discover credit-card rate nearly tripled without adequate notice and that issuers send "deliberately misleading and confusing" information.

With Americans weighed down by some $900 billion in credit-card debt - an average $2,200 per household - practices of the very profitable industry have been ripe for scrutiny by the Democratic-controlled Congress.

Levin's subcommittee, which has been investigating the industry, looked at how credit-card issuers raise consumers' rates, to as high as 30 percent, when their so-called FICO credit scores decline - even if they've paid credit-card bills regularly and promptly. In many cases, consumers have little notice of the increased rate, which are automatically triggered by declines in FICO scores for reasons left unexplained, the subcommittee found.

In some cases, just opening another account, such as a department store credit card, could trigger the downgrade in credit score.

In one of the cases cited by the subcommittee, Marjorie Hancock of Arlington, Mass., wound up with interest rates on her four Bank of America credit cards of 8 percent, 14 percent, 19 percent and 27 percent, even though her credit risk is the same for all four.

Ken Clayton, managing director of card policy for the American Bankers Association, which represents the banking industry, said Monday: "Costs for nearly every product can change, be it because consumer's risk profiles change or because underlying costs change. Credit cards are no different."

Five big financial companies - Discover, Bank of America., Citigroup Inc., JPMorgan Chase & Co. and Capital One Financial Corp. - issue around 80 percent of U.S. credit cards, according to the subcommittee. A Capital One official also testified at Tuesday's hearing.

Citigroup, Chase and Capital One said they will discontinue the practice; Citigroup's change already is in place and Chase's will take effect in March. But Levin says legislation may still be needed to get other companies to do the same.

Larry DiRita, a spokesman for Bank of America, said its customers "have the right to say 'no' to an increase."

[marcodele]

What a bunch of whimps. They''re grilling these ruthless predatory lenders and holding out the "possibility" of legislation. Does Congress really think these thugs are going to roll over and surrender millions of dollars because they were scolded?

[bm6005]

IamPundit

More like YouamIdiot!!!

[dyalme]

greed greed greed and more greed. The only bright spot is these A%%holes CAN''T take the MONEY with them when they died. THE LAWYERS WILL GET IT ALL {+}

[andor3]

is anybody paying attention? credit card companies make more money by charging more to customers with bad credit scores. How are credit scores determined? By the credit companies reports! And it is fairly common for the companies to make completely bogus reports. Even when errors are caught it is hard to get the errors removed.

Now Congress is grilling the credit card execs. Who is one of the biggest donors to congressional campaigns? Credit card and banking!

[rosesnpearls]

About time. I pay extra each month and pay on time, yet my rate is climbing.

[denn034]

Interest rates are too high with credit cards. This is a valid line of inquiry during a time of high prices.

[scottyusa]

Its about time someone on the hill realizes we the consumer are being consumed by these credit card companies. They themselves are more responsible for american debt than anybody else. They prectically beg you to get their card and the fleecing starts almost immediately. "It''s important criteria for how to manage risk and pricing," said Roger Hochschild, Discover''s president and chief operating officer". What a buch of smoke that one is. Where is the risk when someone meets their obligations? That idea may be good for new cards but these companies are biting the hand that feeds them. They should be penalized for this!

[aggiekat2004]

Credit card companies are criminal and predatory. I even subscribe for credit report monitoring from all three agencies and STILL can''t get my FICO score without paying EXTRA for it!

And when I found errors on my credit report, it took 90 days to get it taken care of. They can ding you immediately, but then it takes 90 days to fix? This is unreasonable. It almost prevented me from getting a job I was applying for because I had a DUPLICATE account on my credit report (MBNA was acquired by Bank of America and it was showing duplicate accounts).

Who is the advocate for the consumer here? If you try to call the reporting agencies, you can''t even talk to anyone. If they are going to be such a HUGE part of our lives, they need to be accessible.

Oh, and by the way...I''m in Texas. One of the agencies (can''t remember which one) is actually serviced by a FOURTH credit reporting agency! So you can''t dispute your credit directly with TransUnion, Experian, and Equifax...you have to dispute it through CSC, who then reports back to Equifax...therefore delaying the process even further.

CRIMINAL!

[a8151947]

Lie, lie lie that is all you get from the President of the credit card people. They all need to be in jail. If every one would stop using the cards, the rates would go down, fast. Are the big boys would be in trouble. I say to he-l with all of them.

[aggiekat2004]

Don''t forget these scores are also now affecting things like your auto insurance...and most companies are pulling credit reports on employment applications.

[aggiekat2004]

I love too that it says "Bank of America customers can REFUSE an interest rate increase." How do I do that???

[fstop100]

what are the salaries of the ceo''s of the credit card companies?

[jntlw-2009]

Credit cards, now that the interest rate have no ceiling, are just criminal usary and adultrated loan sharking in the purest and ugliest form. The seduction, luring, enticment,and pure greed tells you they are unscrupulous and evil. Regulate Regulate Regulate as intensly as possible and nail their ***! Fry ''em! I for one think I will cut my last card up - to he*l with them!

[jntlw-2009]

love too that it says "Bank of America customers can REFUSE an interest rate increase." How do I do that???+
All I had to do was write a letter telling them I did not accept their new rates. Capital One card!

[andor3]

"I love too that it says ''Bank of America customers can REFUSE an interest rate increase.'' How do I do that???"

It''s a weaselly lie. You can refuse. They then tell you your card is canceled or will not be renewed when it expires. Kinda like when a thug points a gun at you and demands your wallet, you can refuse...

[fstop100]

Put them in line with the federal prime rate.
This is one of the biggest causes of inflation.
People use their credit card and what they owe inflates.
When the mobsters charged this kind of interest and got caught they were put in jail!

[scottyusa]

jntlw
Excellent! Just send them a note stating that you have too many zero balance credit card offers to put up with a rate hike by a company you were loyal to. You may even get a reduction.

[ov442]

You can say NO to an increase? sweet, I say no. But they still do it. Sounds like a deal.

I think the lady with the 4 Bank of America cards pry got told "the first 3 were a mistake, they should all have been raised to 27%" ....lol

Personally, i think congress should lift all restrictions on businesses from anything they do to consumers.
Why? because they will do as they always do, find any and every way they can with the most educated, most clever, highest paid guns to create and use marketing and accounting fraud and designed financial programs to scruuu over the American people in every possible way.
Why is that good? because its happening to us now just under a threshhold of disaster; they have been held back from total destruction by the piddly laws congress of past has legislated and if they let them go wild, the consumers will finally wake up and put a stop to it. Otherwise, no one will. they''ll just make teensy little changes to satisfy congress for now and then go do worse stuff when their backs are turned.

[prairiefox1]

WE NEED A WELL WORDED LOAN SHARK LAW AND GUARANTEED PENALTIES !

[prairiefox1]

I OWE $387.00 TO A CREDIT CARD! THEY WILL BE PAID OFF WITH A GUARANTEE THAT I WILL NEVER DO BUSINESS WITH THEM OR THEIR SUBSIDIARIES AND THEY CAN TAKE THAT TO THE BANK!

[jetranger7]

NO-NO- Lets just go after thse Crooks & Criminals & Fraudsters, and have some fun with them and their degenerate famalies too, Chase after these Degenerates, hunt them down, with guns, bullits, arrows, anything, its wat past time, then when we catch these Degenerate Sleeze Balls, put a Rope around their necks, and throw them off a freeway over pass, and let semi''s hit them while they dangle from the bridge upside down !!! They deserve it ! Forget making up new laws to protect us, it doesn''t work, time to take matters into our own hands !!!

[aggiekat2004]

Big problem these days, though. If you default on a card or settle with the credit card company, the IRS counts it as INCOME and you''re then TAXED.

I got behind with a card after September 11th...100% commission job, and I ended up going back to school. I took a hit on my credit, but had several manageable cards that I kept paying on. I was late on one of them, and got hit with a late fee, which put me over the limit. So my small, manageable card became HUGE because of interest, over-the-limit fees, and late fees. Then the other ones raised their rates, even though I was current on them. I couldn''t get out of it, and eventually settled.

Then I received "income" statements from the companies to turn in with my tax return! The problem was that it included all of their exorbitant fees and interest.

I was also abused and harassed by their collectors...one guy told me that I was a deadbeat because I had gone back to school to retrain in another field.

[prairiefox1]

NO-NO- Lets just go after thse Crooks & Criminals & Fraudsters, and have some fun with them and their degenerate famalies too, Chase after these Degenerates, hunt them down, with guns, bullits, arrows, anything, its wat past time, then when we catch these Degenerate Sleeze Balls, put a Rope around their necks, and throw them off a freeway over pass, and let semi''''s hit them while they dangle from the bridge upside down !!! They deserve it ! Forget making up new laws to protect us, it doesn''''t work, time to take matters into our own hands !!!


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Posted by JetRanger7
.
HOW DO YOU DANGLE A PERSON UPSIDE DOWN WITH A ROPE AROUND HIS NECK?

[jetranger7]

EVERYBODY-EVERYBODY READ THIS : If you go to the web site (WWW.RIPOFFREPORT.COM), there you can register -FREE- and read about all the other consumer complaints, about all these companies and their fraudulent ways, that many other consumers have reported, its worth reading, pass the word around about this site too !! WWW.RIPOFFREPORT.COM

[davidlar2]

Don''t like credit card interest rates? Use a debit card instead....

If you need a loan, find a cheaper loan than a credit card.

Consumers get into these problems without thinking and then ask the government to bail them out. Where is the personal responsibility?

I use credit cards, pay off my balance in full every month, and get a 1% cash rebate.

[aggiekat2004]

Oh, yeah. And did I mention that Bank of America acquired MBNA, created "new" account numbers, and tried to collect on an already settled debt? Since there were two credit card numbers...the credit reporting agencies got confused, and I couldn''t resolve it for a LONG TIME.

Again, these agencies NEED TO BE ACCESSIBLE TO CONSUMERS if they are going to play such an important role in our society.

[jetranger7]

PRAIRIE FOX1,, YOU KNOW, I''M LAUGING SO HARD I CAN BARELY TYPE,, I REALLY NEVER GAVE MUCH THOUGHT TO THAT NOW THAT YOU BRING IT UP,, BUT IT DID BRING A GOOD LAUGH !!!! THANKS FOR MAKING ME CRACK AT MY OWN STUPIDITY,, THATS EVEN FUNNIER !!!!

[prairiefox1]

PRAIRIE FOX1,, YOU KNOW, I''''M LAUGING SO HARD I CAN BARELY TYPE,, I REALLY NEVER GAVE MUCH THOUGHT TO THAT NOW THAT YOU BRING IT UP,, BUT IT DID BRING A GOOD LAUGH !!!! THANKS FOR MAKING ME CRACK AT MY OWN STUPIDITY,, THATS EVEN FUNNIER !!!!


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Posted by JetRanger7

WELL I WANTED TO KNOW! I LIVE AND LEARN!

[aggiekat2004]

I''m all for personal responsibility. But I do believe that the credit card companies are charging too much for their services, and taking advantage of consumers.

I took responsibility for my debt, and didn''t file bankruptcy, but it''s been a hard road and a tough journey...the credit card companies and credit reporting agencies only make things much more difficult for those of us who do feel a sense of responsibility.

It''s like the mortgage issues right now...I saw ads on TV for $300,000 mortgages for $1000 a month...if you follow the "don''t get something for nothing" mentality, you might have figured out that something was wrong with that scenario. Or "interest-only" loans. But those companies shouldn''t have been allowed to offer those types of products. Yes, the consumer has some responsibility...but I think the companies that offered these products KNEW that it would come crashing down.

[aggiekat2004]

I DID LIKE THE PART ABOUT TAKING THINGS INTO OUR OWN HANDS.

As we say in Texas... ''git a rope.''

[prairiefox1]

WE NEED TO GET TOGETHER AND START OUR OWN CAMPAIGN TO MAKE SURE NO ONE GETS A CREDIT CARD AND DRIVE THESE SLEEZBAGS OUT OF BUSINESS! YES EVEN THE BANKS!
WE THE PEOPLE ARE THE MAJORITY AND IT CAN BE DONE!
START YOUR LOCAL CHAPTERS AND SPEAK AT SCHOOL ASSEMBLIES AND WE CAN DEFINITELY PUT A FINAL END TO THIS INSANITY !

[wvce]

Credit card companies are nothing but crooks and userers, but their industry is so profitable because people accept the way they do business. The best way to beat them is to not play their game. I don''t have a credit card and refuse to accept a credit card. If we stop accepting their cards, we''ll stop being at their mercy.

[frb01]

If you get in trouble with CC debt there is no way out, not when they raise the rates to 30%. Congress should pass a law now, the rate at the time of the charge is the rate. Period and end of story.

[samthetvcat]

I''m good about never buying stuff I can''t afford (like I use the library, and shop at Marshall''s and only when necessary, etc), but with my ADHD I''m terrible about paying right on time before the deadline. It gives me a sick feeling in the pit of my stomach when I miss the deadline by a couple of days and then have to pay $10 to $15 in interest charges because of it.

Credit cards are so handy because otherwise I''m not sure how people would buy stuff online - sometimes the sales are so great that it seems like it''s worth putting up with the extra credit charges just to have that easy access to the card.

But I really feel for people who find themselves in a jam because if that $15 started to snowball, it could get out of control so fast! How do people ever catch up? I can''t imagine anything more stressful.

I heard somewhere that the credit cards for many of the department stores accounts for something like 20-30% of their total revenue these days. Like clothes and stuff only make up part of their revenue. That doesn''t seem right! :(

[lisann326]

The car insurance company does the same thing and all it does is kill the middle class who are paying off student loans if they even are able to go to college anymore.

[jetranger7]

Ya, lets go after them, with Baseball bats, at their homes too, lets do what they would of done back in the good ol'' days !! I know what Tony Saprano would do to these Scum Bags, and those collectoon agents too ! Its comin, and the best part, there isn''t a thing they can do bout it-except run !!!!! I still liked the ending of the Movie Casino, in the cornfield part with the ball bats, you hearin the Citi-Group President and Chase Mastercard Ceo,,get yo head out of yo butt and pay attention you Degenerates !!

[ssm9451]

The best way to fix this problem is: DON''T HAVE CREDITS CARDS!

[samthetvcat]

"In some cases, just opening another account, such as a department store credit card, could trigger the downgrade in credit score."

Also, you know what''s weird - I signed up for one of those benefits cards that I wanted to replace my basic card, and was warned by the bank that if I cancelled my old card before the expiry date that would hurt my credit card score! Like shouldn''t having less credit be a good thing?!?

I thought they might be lying to me, but I heard the same thing from Suze Orman on Larry King a couple of days later, who suggests that people just cut up their card and let it expire rather than cancel it.

Damned if you do and damned if you don''t . . .

[rudy654-2009]

I like the picture of these mafiosos trying to justify burying their "clients"

[micma-2009]

These people are preditors. It''s about time we had a Congress that looks after the interests of ordinary Americans.

[brianp55]

I attempted to pay off a credit card by calling B of A and telling them to debit my checking account. The B of A rep questioned me about why I wanted to pay off and cancel this account. He told me he had to wait until the following day to debit my checking account (a lie). The following month, I learned that he had not, in fact, carried out this tranaction and they were charging me not only additional interest but a late charge as well. I flipped and refused to pay. It required two additional such episodes until I was able to pay off and kill this account. One down...one more to go. Believe me, these banks do not want you to pay off your credit cards and they will lie and engage in fraud to prevent this from happening. Best thing is to carry only one credit card for emergency use only.

[savdavid]

The bank and credit card industry has used their massive profits from the outrageous interests they have been charging Americans to buy the Congress and the administration. Nothing will be done. Only the people can fight them now by refusing to use their cards of middle-class rape and destruction.

[rowdytexan2]

They should set a limit on interest on credit cards and everyone pay the same rate. If someone''s late on their payments, the late fees alone add up enough make up the difference. If they want to issue a card to a high risk customer, it''s their risk, not ours!

This is the most scumbag business in the US. They''re leaches!

Pay cash and live within your means. And if you need a card to buy online, get a debit card. It''ll cost you a dollar to use it, but that''s a lots less than getting caught up in 30% interest rates if your payment lands there a day late.

[rfcnj68]

Here is the funniest statement in this whole thing "Larry DiRita, a spokesman for Bank of America, said its customers "have the right to say ''no'' to an increase." Yeah don''t increase my rate or else, response or else what we are raising your rate and there is nothing you can do about it. This guy must think everyone is an idiot and believes this.

ssm9451 you are right the best fix is no credit card but today that is almost impossible because of how some companies operate with reservation you need to give a credit card to reserve a car for example. If you are going to have a credit card shop around they are always offering lower interest rate cards and even 0% for 12 months the trick is not to purchase more than you can pay back over that year. Never have more than 2 with a max credit limit of 2500 dollars this is much easier to pay down then the higher ones.

[krazykat2525]

credit card companies joined together & pay both Rep & Dem 8-10Million a year (maybe higher now)as such they operate above & outside of the law which Congress allows them to do. Usuary Laws prohibit exorbinant interest rates: they are illegal. None the less our bought & paid for Congress gives them permission to do so & collection laws not 4 them. They call 5 to 6 times a day (by law they can only call once a day, but hey, they are outside the law. So they hound you every single solitary day & asking them not to, even writing does not apply to them, no sirree bob; NO TAXATION WITHOUT REPRESENTATION.WE, THE PEOPLE ARE NOT BEING REPRESENTED WHEN BIG BUSINESS BUYS CONGRESS.

[keithle1]

Get a credit card with a reasonable rate & a low limit. Use it for emergencies. How many credit cards do you need?

It''s too easy to get into debt. If you are able to do it then pay for everything using cash & checks.

[speakinup]

When I was much younger, and had a stepping stone job, I got myself into debt - not badly, but enough that I could do little more than pay the minimum. It took three - four years to pay off.

But, I still think credit cards are useful, and learned a lesson. NEVER buy anything with a credit card, unless you already have the money in hand. Get free use of their money for a month, and the protection a credit card will offer. Cruise company goes bankrupt on you - no worries. Amex paid an $8000 bill for us shortly after 9/11 when Renaissance cruise line went under (no pun intended).

Get the extra year''s product warranty, get the 5% back on gasoline, get the other perks - JUST PAY IT IN FULL EVERY MONTH !

My early life experience is now affording me the last laugh. How sweet it is!

[gkc99]

Chase tried to boost my interest rate significantly by sending a notice that if I used the card further, I''d agree to a rate increase on the entire balance. This notice was sent in one of their usual come-on mailers instead of with the monthly bill. When I notified them I would be filing a complaint with the Delaware secretary of state office and with federal regulators, they backed down.

So if you''ve been f*cked over by one of these cockroaches, get threatening about reporting to consumer protection agencies. It just might work.

[nothappyatall]

"They call 5 to 6 times a day (by law they can only call once a day,..."

WOW like thats hard to stop- you get an UNLISTED number, poof, the calls vanish.

[jyu1915]

I''ve had problems with Chase as well. I applied for an Amazon credit card so I could purchase stuff there. They put a $12 recurring per month charge on my account for "identity protection" (something I didn''t ask for). The Amazon site said there was no annual fee, so I thought, "what''s the harm in getting a card?" It took 2 hours on the phone to talk to customer service to get the charges removed.