SOURCE
[/quote]Citigroup to End Two Credit Practices
Action on Interest Rates Comes Between Senate Sessions Probing Industry
By Kathleen Day
Washington Post Staff Writer
Friday, March 2, 2007; Page D02
Citigroup, the nation's second-largest credit card issuer, said yesterday that it will stop imposing two common interest-rate charges that consumer groups and some members of Congress have criticized as unfair and abusive.
Citigroup said it was halting a practice known as "universal default," under which a cardholder's interest rate on a Citibank card increases if the holder is late on a payment for another, non-Citibank credit card. Several major credit card issuers have universal-default policies.
Citigroup said it also would no longer reserve the right to raise a customer's credit card interest rate at "any time for any reason," a policy also common in the industry.
The company said the only reason rates and fees would increase now would be because "a customer pays Citi late, exceeds the credit limit or pays with a check that bounces."
The action comes on the heels of a Senate Banking Committee hearing in January on credit-card-industry practices and a week before the Senate permanent subcommittee on investigations, part of the Homeland Security and Governmental Affairs Committee, holds a similar session.
A spokesman for Citigroup, the nation's largest financial-services firm, said the timing of its announcement was a coincidence and was not intended to head off possible legislation banning the practices it says it will voluntarily end.
"This is a positive step, but Congress still needs to require that all credit card companies play by the same rules of fairness," said Travis Plunkett, legislative director of the nonprofit Consumer Federation of America. "This is a volunteer action. They could change their mind in a week. And unless Congress acts, there will always be players who will be tempted to make more money by using an abusive practice."
The hearings stem in part from questions that were raised by Sens. Christopher J. Dodd (D-Conn.), now Senate Banking Committee chairman, and Carl M. Levin (D-Mich.), now chairman of the investigations subcommittee, during passage of bankruptcy legislation in 2005.
The legislation, which makes it harder for consumers to wipe out debt through bankruptcy, was pushed by the credit card industry and largely supported by Republicans, who then controlled Congress. Dodd, Levin and other lawmakers charged that industry practices such as those that Citigroup ended yesterday help push some consumers into bankruptcy.
Dodd and others had wanted the bankruptcy bill to include limits on some of those practices -- or at least to require companies to spell out how much extra in interest costs a consumer would eventually pay by making only minimum monthly payments. Those provisions were rejected.
Dodd put card companies on notice at the January hearing, saying, "If you currently engage in any business practice that you would be ashamed to discuss before this committee, I would strongly encourage you to cease and desist that practice."[/quote]
While I don't like the Universal Default practice, it IS spelled out in the fine print. My boss is currently carrying a balance on a credit card at 33% interest because he was late making a payment to a different creditor.
Does it suck? Sure! It was in the documentation that it would happen if he was late with a payment on any of his cards, though. If you can't be arsed to read the papers you're signing, you probably shouldn't be signing them.
[/quote]Citigroup to End Two Credit Practices
Action on Interest Rates Comes Between Senate Sessions Probing Industry
By Kathleen Day
Washington Post Staff Writer
Friday, March 2, 2007; Page D02
Citigroup, the nation's second-largest credit card issuer, said yesterday that it will stop imposing two common interest-rate charges that consumer groups and some members of Congress have criticized as unfair and abusive.
Citigroup said it was halting a practice known as "universal default," under which a cardholder's interest rate on a Citibank card increases if the holder is late on a payment for another, non-Citibank credit card. Several major credit card issuers have universal-default policies.
Citigroup said it also would no longer reserve the right to raise a customer's credit card interest rate at "any time for any reason," a policy also common in the industry.
The company said the only reason rates and fees would increase now would be because "a customer pays Citi late, exceeds the credit limit or pays with a check that bounces."
The action comes on the heels of a Senate Banking Committee hearing in January on credit-card-industry practices and a week before the Senate permanent subcommittee on investigations, part of the Homeland Security and Governmental Affairs Committee, holds a similar session.
A spokesman for Citigroup, the nation's largest financial-services firm, said the timing of its announcement was a coincidence and was not intended to head off possible legislation banning the practices it says it will voluntarily end.
"This is a positive step, but Congress still needs to require that all credit card companies play by the same rules of fairness," said Travis Plunkett, legislative director of the nonprofit Consumer Federation of America. "This is a volunteer action. They could change their mind in a week. And unless Congress acts, there will always be players who will be tempted to make more money by using an abusive practice."
The hearings stem in part from questions that were raised by Sens. Christopher J. Dodd (D-Conn.), now Senate Banking Committee chairman, and Carl M. Levin (D-Mich.), now chairman of the investigations subcommittee, during passage of bankruptcy legislation in 2005.
The legislation, which makes it harder for consumers to wipe out debt through bankruptcy, was pushed by the credit card industry and largely supported by Republicans, who then controlled Congress. Dodd, Levin and other lawmakers charged that industry practices such as those that Citigroup ended yesterday help push some consumers into bankruptcy.
Dodd and others had wanted the bankruptcy bill to include limits on some of those practices -- or at least to require companies to spell out how much extra in interest costs a consumer would eventually pay by making only minimum monthly payments. Those provisions were rejected.
Dodd put card companies on notice at the January hearing, saying, "If you currently engage in any business practice that you would be ashamed to discuss before this committee, I would strongly encourage you to cease and desist that practice."[/quote]
While I don't like the Universal Default practice, it IS spelled out in the fine print. My boss is currently carrying a balance on a credit card at 33% interest because he was late making a payment to a different creditor.
Does it suck? Sure! It was in the documentation that it would happen if he was late with a payment on any of his cards, though. If you can't be arsed to read the papers you're signing, you probably shouldn't be signing them.
Or at least the bold part?
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