Connecticut Attorney General's Office
Press Release
Attorney General Calls On Fed To Use Rule-Making Authority To Roll Back Credit Card Interest, Fee Hikes
December 16, 2009
Card issuers are arbitrarily hiking credit card fees and interest rates to as high as 30 percent to foil the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) before it goes into effect in February 2010. The law will prohibit the very increases issuers are imposing unless payments are at least 60 days late.
Blumenthal noted that the CARD Act empowers the Federal Reserve to compel banks to roll back arbitrary interest and fee increases between the law's May enactment and its February implementation. Blumenthal urged Bernanke to issue Federal Reserve rules implementing the law, which are now being written, that compel card issuers to reverse all interest rate and fee increases unless consumers missed or were late making payments.
Blumenthal's office has received hundreds of complaints from consumers about arbitrary credit card fee and interest rate hikes to as high as 30 percent.
"As you know, provisions of the CARD Act will protect consumers from arbitrary rate and fee increases, require advance notice of rate increases and other significant changes in terms, and provide consumers with the right to cancel the account prior to unfavorable changes in rates or terms," Blumenthal said in his letter. "Those provisions, however, are not effective until February 22, 2010.
"In a blatant attempt to unfairly exploit this interim period, many credit issuers are gouging their customers by imposing outrageous rates and fees ahead of the implementation of these important protections -- the same galling tactics Congress intended to prevent. In these difficult economic times, consumers already burdened by job loss and pay cuts should be spared such abuse.
"In light of their deplorable treatment of consumers -- not to mention the arrogant manner in which they have mislead and thumbed their noses at Congress -- we cannot trust card issuers voluntarily to 'make things right' with consumers. That is why I urge the board to put teeth into the CARD Act as it drafts the remaining regulations.
"Specifically, I urge the Board to draft rules to implement Section 148 of the Truth in Lending Act (TILA) as amended by Section 101(c) of the CARD Act that will mandate a meaningful review of interest rate increases imposed by card issuers since January 1, 2009. Such rules must require that interest rate increases instituted since January 1, 2009 be rolled back where the statutorily required review indicates no adverse conduct by the card holder.
"Where a consumer is making his or her payments on time and is otherwise complying with the terms of their credit card agreement, that consumer should not be penalized with a higher interest rate or other fee increases. The banks are doing nothing less than requiring consumers to pay yet again for the banks' own mistakes.
"Enough is enough. Such self-serving conduct and unilateral amendment to the consumer's credit agreement is unconscionable and should be prohibited by the Federal Reserve Board's proposed regulations."
The Federal Reserve is expected to issue rules implementing the CARD Act in late January or early February at which time the public can comment on them. Blumenthal said he expects to submit formal comments when the rules are announced.
Blumenthal said he is writing now to urge the Federal Reserve to focus its rule-making process on protecting consumers.
Blumenthal's letter comes after he sent letters to 11 of the largest credit card issuers demanding they roll back arbitrary interest rate and fee increases. He also wrote the American Bankers Association, the nation's largest banking lobbying, asking it to explain the reasons for the increases and to urge its members to reverse the increases.