Citi Ending Universal Default Credit Card Practice -Report

[Zenlitened]

Kudos to our Dem senators for putting these issues in the legislative spotlight. :)

Citi Ending Universal Default Credit Card Practice -Report

DOW JONES NEWSWIRES
March 1, 2007 9:04 a.m.

By Damian Paletta
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--In the wake of rising criticism from congressional Democrats about credit card practices, Citigroup Inc. (C) plans to stop charging higher interest rates to customers if that customer is late on a payment to another company, the American Banker reported Thursday.

This practice, called universal default, is legal but has been challenged by Democrats and consumer groups as being deceptive and unfair.

(snip -- paragraph about no comment from Citi)

"This has been a standard business practice across the industry since the inception of the credit card business, but we understand that customers view the right to change prices as unfair and one-sided," the memo said. "Under our new practice, after the card is issued, we will not change rates, fees, or terms of the card for the length of the agreement (typically two years) at which point a new cards is issued."

(snip -- paragraph about banking industry source)

Senate Banking Committee Chairman Christopher Dodd, D-Conn., told reporters Wednesday that a major credit card company was close to making an announcement about ending a specific practice, but he wouldn't provide further details. He has already held one hearing on credit card industry practices and Sen. Carl Levin, D-Mich., is expected to hold another hearing this month.

(snip -- final paragraph about calculating monthly balances)

Link:
http://online.wsj.com/article/BT-CO-20070301-709213.html?mod=moj_companies

[wakeme2008]

1. I can not see the whole article but

What about those customers that have a good payment history with Citi, that Citi up their rates because of some other credit report item... I bet they do not plan to lower them.... :grr:

[Zenlitened]

3. Well, I don't know if they'll undo past "universal default" rate increases.

There's no information on that in this article.

(Most of the article is there, and I tried to give a sense of the three paragraphs I snipped out.)

But maybe this will empower consumers a bit more, to get on the telephone and request/demand that past increases be reversed now that Citi admits "universal default" is hideously unfair (if not downwright criminal).

[enki23]

2. simply *electing* democrats makes them think twice about some of their worst practices...

funny how all the nastiest practices by these assholes happen when the republicans are in power, isn't it?

funny.

[meegbear]

4. This should never have been allowed in the first place!

I had 3 cards, one from Chase and 2 from Bank of America. I was late for a payment for all 3 in August 2005 and when the law went into effect in November 2005, they retroactively raised my rates to 28% and 31%!

I had to goto into debt consolidation to handle them. They sent me letters acknowledging the program and then lectured me about how I should have handled my money better! :nuke:

Besides the fact I went from 70+K in 2002 to 35K, I'm sure those rates had absolutely fucking nothing to do with this :grr:

FUCK YOU CHASE AND ESPECIALLY BANK OF AMERICA!

[Omaha Steve]

5. and if there is a mistake on your credit report... (it happens a lot)

You have to fight several companies that rate you up. I'm Steve Lee. My son is Steven Edward. I've had his problems on MY report in the past. It was a pain to clean up.

[youngdem]

6. Pfft....Fake victory...read the article...

"Under our new practice, after the card is issued, we will not change rates, fees, or terms of the card for the length of the agreement (typically two years) at which point a new cards is issued."

So, the new rule just means they won't do it except every two years, when they can change your card, terms, rates and fees.

Hollow 'victory'. Just shows you can't trust some industries to police themselves, because it is like asking a thief not to steal. We need to legislate reasonable caps on rates, late fees and other common junk fees that now make up more than half of many banks' revenues.

[Zenlitened]

8. Which at least gives you time to bail, no?

:shrug:

[youngdem]

9. Not really....If you are in default on one card, you're unlikely to be in a position to pay off

If you are in default on one card, you are unlikely to be in a position to just pay off another card.

This is a fake victory for consumers. The pols are trumpeting a voluntary change by a company who really has only adopted a SLIGHTLY less shitty policy.

[Zenlitened]

10. Well, we disagree, I guess. This is a step forward, IMO...

The fact is, this insulates more consumers from the sudden shock of an instant, across-the-board rate penalty. The debt death-spiral.

It gives people more time, depending on where they are in the two-year cycle, to pursue debt consolidation, balance transfer if their credit has not been too badly dinged, or even negotiate a payment plan with the card issuer.

Rather than carping about "pols" "trumpeting" a "hollow victory," I think we could try to give Dodd other Dems supporting his efforts some credit, so to speak, for lighting at least a little bit of fire under the credit companies.

[dkofos]

7. There is hope.

But I still won't do business with them.