Credit Card Act (They Write Letters)
Dodd follows up on the earlier passage of the Credit CARD Act with a sharply worded letter telling regulators that they’d better keep the credit card companies in line during the 9-month window before the bill takes effect:
I am disturbed by recent reports in the press that some credit card companies are allegedly raising interest rates on their customers’ existing balances without justification. As you know, the Credit Card Accountability Responsibility Disclosure (Credit CARD) Act enacted in May will protect cardholders by curbing such abusive practices. Press reports indicate, however, that some companies are raising rates now to get around these consumer protection provisions before they take effect and before regulations can be promulgated to enforce them.
I urge you to do everything in your power to protect cardholders from these abusive practices. In particular, as the Federal Reserve drafts regulations and the agencies enforce them going forward, I invite your diligent attention to Section 101(c) of the Credit CARD Act which will require credit card companies to review every six months any account where the interest rate has been raised since January 1, 2009, and reduce the rate if the review indicates that the cardholder has become less risky or the circumstances that warranted the increase are no longer present.
In addition to any future interest rate increases, all interest rate increases that have taken place this year will become subject to the mandatory 6-month review. I ask you to immediately notify all credit card companies under your respective jurisdictions that they will be held accountable for all interest rate increases during this time period and will be subject to the review requirement once it takes effect.
This January look-back was designed to address reports of credit card companies arbitrarily raising rates after the December 2008 promulgation of the UDAP regulations that would have taken effect in July 2010, and to deter companies from doing the same before the provisions of the Credit CARD Act take effect.
However, the look-back provision will serve as a deterrent only if it will be implemented and enforced effectively. I therefore expect the Federal Reserve to draft regulations that provide clear, robust requirements for the review of rate increases, and the agencies enforcing the regulations to hold the credit card companies strictly accountable for conducting thorough reviews and decreasing rates where warranted.
I’m still of the view that any bill which could pass the Senate on a 90-to-5 margin could have been made a lot stronger (maybe an “effective immediately” bill would have passed 70-to-25?), but it’s good to see a little follow-up on this subject.
(Via Chris Good at the Atlantic.)