Soaring credit card rates sneaky but legal
Remember the end of the horror film "Carrie," when that scary hand comes shooting up out of the grave?
We're feeling a bit like that here at Fixer Headquarters.
Everyone was happy when the new Credit Card Accountability, Responsibility and Disclosure Act was signed. But just when we thought interest rate surprises and other tricks were safely in the ground, we find they're not quite finished yet . . .
Dear Fixer: Back in June, my credit card interest rate jumped from 5 percent to 15 percent without any notice. I called Capital One, and they proceeded to tell me that they were raising interest rates because of the economy. They also told me that they notified me by mail, which they never did.
My minimum payment went from $144 per month to $332.
They put me on their hardship program, which gave me three months with no interest and no late fees, though other fees were incurred. The three months ended in September, and they refused to put me back on the hardship program or lower my interest rate.
I have always paid my payments on time. My wife has been out of work since February. The credit card companies are raising their interest rates now while they still can, before the new law takes effect in February 2010. At that time they won't have to raise them because they already did, so the new law is kind of a moot point.
My household is having a hard enough time paying for necessities that we cannot afford. Now we get a huge increase in our interest rate just because of the economic situation. They cannot expect people to continue to pay when people cannot afford a roof over their heads or groceries.
I hope that the government sees what is happening now with the credit card companies because in February it will be too late -- the damage will already be done.
Mike Miller, Hanover Park
Dear Mike: You told us that on top of this issue, when you made your October payment a little early on Oct. 1, they counted it as a September payment and then asked you for another chunk of money for October. Which makes us wonder, really, what's next?
The good news is there are moves in Congress to try to speed up the protections in the CARD Act. Sen. Chris Dodd (D-Conn.) introduced legislation on Oct. 26 to try to immediately freeze credit card interest rates to prevent the sort of shenanigans you've described. (The act includes a requirement that credit card companies review every account that's seen an interest rate increase since Jan. 1 and reduce rates where warranted, but the trick with that will be getting regulators to enforce it.)
The law will make it illegal for companies to raise interest rates, fees and finance charges on existing balances without warning. It also will force them to give consumers at least 21 days to pay their bill, among other consumer protections.
But for now, there's a mad scramble by credit card issuers to lock consumers into some pretty awful terms. Read on:
Dear Fixer: I received a notice from my credit card issuer on Oct. 16 stating that my APR for purchases was going up to 29.99 percent as of Nov. 30 unless I opt out and pay my balance off on the current terms.
I opened this account eight years ago with an interest rate below 10 percent, and I have always been on time and paid more than the minimum balance.
I asked their representative if there was another type of card or something they could offer me with a lower interest rate. They said they could not.
They tried to discourage me by saying that other companies are also going up. I chose to close the account, leaving me without a major credit card.
Yvette Mooney, Aurora
Dear Yvette: You have to admire their timing: Not only did they want to triple your interest rate, they wanted to do it in time for the holiday shopping season.
Sadly, it would have been better for your credit score to just keep the account open, but we understand your frustration.
We've gotten lots more letters like yours, including one from a local couple who were ripped off by their business partner and forced to put the subsequent debt on their credit cards.
They had faithfully paid on their cards for years, but were recently shocked to see several of the rates rise to more than 28 percent and one card's APR increased to 34.99 percent for new purchases.
They've since sold their house and are using the equity to pay off the credit cards.
If you've got a credit card horror story -- or something else you'd like to talk about -- join The Fixer's live Web chat at noon Monday at www.suntimes.com.
Getting the runaround on a consumer problem? Tell it to The Fixer, at www.suntimes .com.
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