Credit Card Companies Being Questioned On Rate Hikes in Massachusetts

Ever since the Credit CARD Act was signed into law last May of 2009, credit card companies have been racing to introduce a number of credit card term changes before the act expressly prevents them from doing so. A lot of these changes have been grossly unfair to consumers and actually defeat the intent of this new credit legislation.

Massachusetts Secretary of Commonwealth, William Galvin, recently sent out letters to some of the largest credit card issuers in the nation, asking for information on adjustments they made in interest rates during the last few months. Galvin is well known for being a tough regulator and he has given seven companies that he requested information from up to January 26 to send replies.

The companies that have been contacted by William Galvin are Charles Schwab, Fidelity Investments, Morgan Stanley, Citigroup, Bank of America, Citizen’s Bank and American Express. These seven companies have all received Galvin’s three page letter requesting them to identify the rate changes that they have introduced since last May of 2009. Galvin specifically wants to know if these companies have moved their fixed rate credit cards to variable interest rates and how much of a rate increase they are imposing on consumers who carry their credit cards.

Galvin’s concern is the surge in credit card interest rate hikes that have been the norm in the credit industry since passage of this new credit card bill. In a statement, he voiced his concern that increases in frequency of fee and interest rate hikes before activation of this new credit card law come February “goes against the intent of the Congressional act.” Galvin also wrote that, “When the credit cards, and the abusive new practices being put in place, are tied to securities broker-dealers, there is a question whether they are acting under the high standards of commercial honor and the just and equitable principles of trade.”

The information that Galvin hopes to get from selected credit card companies may just be more confirmation of what is already apparent. According to a research done by an independent, nonprofit organization, The Pew Charitable Trusts, the median interest rate advertised by credit card companies last July of 2009 was already 13% to 23% higher compared to interest rates available in December of 2008.

So far, few of the banks asked by Galvin have responded to his request. A spokesman from Fidelity Investments said that his company will respond to the Secretary’s request, noting that his company does not directly issue credit cards. The company Morgan Stanley declined to comment on the issue. Spokespersons from Bank of America, American Express, Citibank, Citizen’s Bank and Charles Schwab were not available to comment on the matter.