Seen in the Courant:
This year’s massive reform by Congress of credit card industry practices was supposed to protect consumers and businesses from abusive rate increases and fees, but major issuers have jacked up rates ahead of the Feb. 22 deadline for the law.
Connecticut Attorney General Richard Blumenthal blasted the banks and other card issuers Monday for the rate hikes, and he demanded an immediate rollback to the interest rates that were in effect Jan. 1, 2009.
"The banks are gaming and evading the new law — rushing to raise rates before consumer safeguards take effect, looting and pillaging before the deadline," Blumenthal said. […]
Noting that several of those issuers received federal bailout money, Blumenthal vowed to join with other attorneys general across the country if the banks didn’t roll back increases.
I’ve said it before, and I’ll probably end up saying it again – what did Congress expect by allowing such a long window before the law takes effect? Granted, some time is necessary, in order to permit banks to update systems for the new notification requirements, and to revise credit underwriting models to consider the new restrictions… but the drive to profit being what it is, how couldn’t you expect banks to optimize their revenues while they can?
It could be argued that this must have, perversely, been the intent of Congress. No qualified elected representative could be so naïve as to believe that something like this wouldn’t occur. If they are…well, add that to the list of reasons to vote anti-incumbent in coming elections.
If the 10% loss ratio cited by Capital One is at all typical its easy to see why rates went up. Its interesting that the goal seems to be to make the losses up in one year by raising the rates enough to pay the 10% back. All the more reason to treat them as charge cards, i.e. pay off every month.