Senate Reacting To Increased Rate Hike Trend

The current trend among credit card companies nowadays are increasing interest rates and fees. Most of the major credit companies such as Discover, Bank of America, Destiny and others have already raised and will probably continue raising their interest rates and fees. The result is credit cardholders losing the option of using their credit for purchases and financial emergencies and finding it more and more difficult to pay off their current debts.

The situation has not gone unnoticed in Washington and the Senate is finally taking notice of the growing trend of increasing interest rates. Last thursday, Christopher Dodd, the Senate Banking Committee chairman gave notice to regulators to create a draft for new regulations that will require a review from credit card companies of their rate hikes since the beginning of the year.

Connecticut democrat Christopher Dodd was instrumental in the passage of the credit card bill. The credit card bill was a set of legislations which aimed to stop the predatory practices of credit card companies whose actions, while earning them millions of profits from credit card holders, played a large part in the current economic crisis. One of the many credit company practices that the bill will stop is the ability of credit companies to arbitrarily change credit card interest rates. With the bill in place, credit companies will not be able raise their interest as easily as they can right now. As a result, many see that the credit card rate hikes credit card holders are experiencing right now are probably preemptive moves from credit card companies looking to establish their profitability before the credit card bill takes away some of their ability to do so.

Because of these developments, Christopher Dodd recently stated that he is worried about the recent reports of credit card companies raising the interest rates of credit card holders before the credit card bill becomes active by next year. He recently sent a letter to Ben Bernanke, Federal reserve Chairman and other government regulators asking that they draft and enforce rules that will implement provisions in the new credit card law to credit card companies which will stop the current practice of rate hikes before the credit card bill becomes active.

Dodd’s provision requires credit card companies to review accounts that were raised since January 1, 2009 every six months. Credit card companies must also reduce a card holder’s interest rate if his credit risk lowers or the need for an interest hike is no longer there.