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Bank of America, the second largest credit card issuer, recently announced a moratorium on all interest rate increases on credit card accounts from now until February 2010, the month restrictions from the Credit CARD Act are set to take effect. Bank of America’s director of federal government relations, John Collingwood, had this to say in a letter sent to congressional leaders early this week:
In light of the concerns expressed to us by our customers, Bank of America will not implement any change in terms (risk or economic based) re-pricing of consumer credit card accounts between now and the effective date of the CARD Act,” he wrote, referring the the sweeping credit card reform act signed into law in May. “We believe that this is … responsive to the concerns we have heard and is consistent with other consumer oriented policy changes we have made recently, like giving customers much more control over the risk of incurring overdraft fees and substantially limiting the application of those fees.
A number of congressman replied quickly to the letter. Senator Chistopher Dodd stated that “every other credit card company should follow suit.”
So how are other credit card issuers taking Bank of America’s announcement? The spokeswoman for Capital One, Pam Girardo, stated that the bank is doing the same as Bank of America and following the restrictions set forth in the Credit CARD Act. Chase, the only card issuer larger than Bank of America, has said they have no plans to change their current policies until required by the law in 2010. Wells Fargo, on the other hand, has been raising the interest rates on many of their credit card accounts as they eliminate over-the-limit fees. Lisa Westermann, spokeswoman for Wells Fargo, defended the interest rate increases as necessary due to “rising business costs and current consumer credit challenges.”
Bank of America’s moratorium on rate increases will not apply to delinquent accounts which will continue to see repricing. Furthermore, the pledge will only apply to consumer credit accounts and not to corporate or business accounts.
Unfortunately, this pledge as well as restrictions that will go into effect early next year will be too late for the millions of Americans that have fallen victim to skyrocketing interest rates, rising annual fees and fee after fee. Although Bank of America’s moratorium is likely politically motivated–a bill to fast-track the Credit CARD Act has been introduced–it’s still good to see responsible action from the credit card industry.