April 18, 2008—A consumer testifying in a House subcommittee hearing yesterday on credit-card practices cited her credit union as the only financial services provider that has not attempted to impose so-called “risk-based” rate hikes on her card accounts.
Susan Wones, testifying Thursday before the House Financial Institutions Subcommittee chaired by Rep. Carolyn Maloney, D-N.Y., detailed her experience with a credit-card company that raised her card interest rate from zero percent to 23.24 percent because she went over the limit on her card one time.
She noted similar experiences with other card issuers and urged the panel to include in any credit-card legislation a requirement that issuers enforce limits on consumers’ credit cards. But she indicated that she has not seen this type of price adjustment with her credit union card, which carries an interest rate of 10 percent.
“My credit union posted my FICO score of 726 on my account, which I understand means my credit is good and there’s a low risk that I won’t pay my debts,” Wones testified. “The bank said in its letter of last week that they raised the rate on one of my cards because of the ‘risk level’ shown in my credit report. What is the reason for raising my interest rate if I am, according to my FICO score, such a good credit risk?”
The hearing was the second held in recent weeks by Maloney to examine H.R. 5244, the Credit Cardholders’ Bill of Rights. Her bill seeks to rein in abusive practices such as unilateral changes in terms and universal default.
The Federal Reserve’s Sandra Braunstein told the subcommittee that the Fed plans to issue proposed changes under the Unfair and Deceptive Practices Act this spring to help curb questionable credit card lending practices. She said the rule would finalized by year-end and will include revisions to credit card disclosures proposed last June under Regulation Z.
Courtesy NAFCU. Copyright 2008 NAFCU. All rights reserved.
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