Schumer Renews Demand For Fed To Immediately Freeze Interest Rates On Existing Credit Card Balances As Companies Try To Sneak In Last-Minute Rate Hikes Before New Federal Limits Take Effect

Press Release

In light of new reports that credit card companies are hiking interest rates on their credit cards in advance of tough federal limits set to go into effect next February, U.S. Senator Charles E. Schumer (D-NY) today renewed his call for the Federal Reserve to immediately place limits on the types of hikes credit card companies can impose on existing balances for cardholders across the country. Earlier this year, Congress passed, and President Obama signed into law, the "Credit Card Accountability Responsibility and Disclosure Act of 2009" setting tough new rules and limits on the interest rates and fees credit card companies can attach to their credit cards. However, those rules are not set to go into effect until February 2010 and recent reports have found that the credit card companies are trying to raise their rates and fees preemptively.

Schumer today renewed his call for the Fed to invoke its emergency powers to place limits on those interest rates hikes before they go any higher. In May, Schumer asked the Fed to take a similar action in anticipation that the companies would try to sneak in rate increases before new rules went in to effect.

"This is what many of us feared about a law that didn't take effect right away. It was never going to take this long for the credit card companies to get ready for the new reforms. Instead, issuers are using the delay in the effective date to wring more dollars out of their customers. It is against the spirit of the law and it is just plain wrong," Schumer said.

According to USA Today, Bank of America and Chase have increased, or are increasing, their maximum balance-transfer fees, from 3% to 4% and 5%, respectively. Chase is also expanding the definition of who could get hit with a penalty interest rate. Meanwhile, InfiBank is establishing a higher minimum APR — the greater of 15.99% or 11.99% plus the prime rate — on many cards. And Capital One and Citigroup continue to raise card rates for certain borrowers.

The "Credit Card Accountability Responsibility and Disclosure Act of 2009" set limits on when issuers can raise interest rates on existing debt and when they can charge late and over-limit fees, but the law doesn't impose a cap on card rates and fees. The bill also limits credit card advertising to young consumers, requires reviews of a cardholder's rate to see whether it can be lowered, bars rate hikes in the first year of the card and more.

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