Credit Card Companies Compelled to Release Data
In what seems to be a reaction following reported hikes on credit card interest rates, the Secretary of the Commonwealth of Massachusetts is asking at least seven of the country’s largest card issuers to furnish information to find out if this is true.
Among those who received this letter of request are Bank of America (BAC.N), Morgan Stanley (MS.N), Fidelity Investments, Citizens Bank, American Express (AXP.N), Citigroup (C.N) and Charles Schwab (SCHW.O).
According to a statement released by Secretary William Galvin, this increase in fees and rate hikes of credit cards a month before full implementation of the Credit CARD Act is not in consonance with the legislative intent of Congress.
He further stated that given some abusive practices tied to securities broker-dealers, it could be questioned whether credit card companies and providers are “acting under the high standards of commercial honor and the just and equitable principles of trade.”
In a study made by The Pew Charitable Trusts, it was revealed that commercial advertisements of most credit card companies showed that as compared to July 2009, the median interest rate was lower in December 2008. They noted a 13% to 23% hike in interest rates.
The Pew is an independent non-profit and non-governmental organization whose mission is to serve public interest through information dissemination and upgrading public policy.
Galvin had given said companies until January 26 to reply. The three-page letters were sent to broker dealers last January 14. It contained, among others, instructions to point-out changes that have been implemented since May 2009 with regards to their rates. It is also asking if variable interest rate cards had replaced fixed card rates and if there were hikes that may have been imposed on consumers these past few months.
As of writing, no statement had been released by some of the companies who received such letter. Only Fidelity Investments, thru its spokesman, had stated that they would comply with the request for data.
Galvin is reputed to be a tough regulator. He spearheaded several investigations into market timing and auction rate securities including the compelling of Robert Jaffe to testify about his role in the Bernard Mardoff investment scandal.
The Credit Card Accountability and Disclosure Act of 2009 (Credit CARD Act), on the other hand, is a federal law signed in May 22, 2009. Its aim is “to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan.” It is set to take full effect this coming February 22, 2010.
