America's
credit
card companies]Credit goes to the fee-creation team[/B]
In truth, universal default was simply another excuse dreamed up by card issuers' fee-creation teams to trip consumers into the lucrative, high-interest-rate bin.
But late last week, Citigroup announced it had seen the light and was abandoning the practice.
Chase also offered another giveback before the hearing. It said it would stop charging over-limit fees. What are those? Remember when your card would be declined if you didn't have enough credit balance remaining to make a purchase? Fee-creation teams realized the firms weren't making any money doing that, so they quietly changed policies to allow consumers to exceed their credit limit and began tacking on a $40 fee for each month the limit was exceeded.
After that Ohio man mentioned that he was charged 47 over-limit fees on his $3,200 balance, Chase now says is will stop levying the fees after 90 days.
Of course, consumers should welcome such changes. It's good to have the big boys abandon these outrageous fees. Perhaps they have seen the light.
Or perhaps something else is going on.
Notice the timing of the announcements -- each one right before a potentially embarrassing congressional hearing. Having sat at such hearings, I can tell you that nothing blunts a good verbal bloodbath more effectively than a witness telling Congress, "Yep, we did that; we were wrong, and we don't do that any more."
Pre-hearing spin muddies story line
News stories following both hearings also were blunted. Instead of stories focused solely on egregious lending practices, journalists had to spend precious paragraphs (as I just did) explaining the card company fee polices and the recent largesse.
The message was now effectively muddied. The original message of these Senate hearings was]
blog on TPMCafe.com[/URL]. She congratulated Congress on winning immediate concessions from the industry. "It is a powerful reminder that leadership in Congress makes a real difference."
But Robert Manning, author of Credit Card Nation, took the contrary view.
"It's a pre-emptive strike," he said. He thinks the industry has a plan]'Good without negative consequences'[/B]
Greg McBride, a senior analyst with Bankrate.com, offered a more down-the-middle assessment.
"I think it's a bold step but not one they are taking blindly," he said. "Lost in the shuffle is how competitive the credit card business is. ... (The new policies) could foster good will without negative consequences for the issuer.
Also lost in the shuffle is Citigroup's rejection of its long-standing policy allowing it to raise interest rates or penalty fees "any time for any reason.
Any time for any reason? Could they really do that? They can. In fact, it's standard credit card issuer policy. You can read about that in
Citigroup's release
.
I find this the most promising piece of news. The most egregious aspect of the credit card industrys behavior is the arbitrary nature of fees and interest rates. One-sided contracts with consumers essentially gave these firms a license to change the terms at any time, which was effectively a license to print money. Citigroup says it will no longer do that. Terms will only change when a new card is issued, the firm said.
One can only hope other credit card issuers will also decide to honor their original contracts with consumers and abide by their agreements. But if past behavior is any indication of future behavior, I wouldn't count on it. What I would count on is this]http://redtape.msnbc.com/2007/03/credit_card_com.html[/URL]
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