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Outrage continues over skyrocketing credit card rates

The outrage is growing from credit card customers and lawmakers who say companies that are unexpectedly raising interest rates on customers with good credit, just aren't playing fair.

Syracuse, New York (WSYR-TV) - The outrage is growing from credit card customers and lawmakers who say companies that are unexpectedly raising interest rates on customers with good credit, just aren't playing fair. 

Capital One is the latest to mail "rate notification change" flyers to some customers. Card holders, who pay on time and always more than minimum, are in some cases seeing their rates doubled.

We pushed lawmakers for answers as to how they're letting credit card companies get away with this.  

“What Capital One has done is outrageous and should be prohibited,” says Senator Chuck Schumer.

Credit card companies can basically change your rates at any time.  They're strapped for cash, so apparently, now's a good time.
 
“These companies have no leg to stand on -- they're hurting because of mistakes they made and now they want consumers to pay,” says Schumer.
 
New rules will prevent card companies from taking advantage of customers like this, but they don't go into effect until July of 2010. Why? In light of the credit crunch, the federal government gave them a little extra time to prepare -- time that's now turned into a loophole. 

"We need to make sure there is a level playing field, that people understand what they're getting, they know the interest rates involved and credit card companies play fair," Congressman Dan Maffei says.    

Schumer says legislation he's drafted would prohibit card companies for raising rates on existing debt. It would also require them to eliminate most of the fine print, and be more concise and upfront with the terms and conditions of your agreement. 

“We expect it to move in the next three to four weeks in the Senate and the House,” Schumer says.

Schumer says if he can get the bill passed, it would go into effect within three months.

If your rate, though, has already been increased by your card company, it won’t come back down again, as the legislation wouldn't work retroactively. 

But at least in the future you'd know that when you sign up for a card, this oversight would be in place. 

Maffei tells us the Financial Services Committee he sits on is working on similar legislation that includes stricter rules for credit card companies. 

February 17, 2009:<br/>Capital One raising rates: The Real Deal

Syracuse, New York (WSYR-TV) - If you've been swiping your credit card often lately, you'll likely want to think twice after hearing this -- interest rates are going way up for many Capital One customers.

And we're not talking just a few percentage points; customers in good standing, who've never missed a payment, tell us their interest rates are nearly doubling, if not more.
 
As it stands, there is nothing to prevent credit card companies from raising interest rates any time they want -- as long as they give us notice. 

In July of 2010, new laws will prevent them from raising rates on existing balances, but not until then.  So, as we reach for plastic more often in this economy, we'll be bailing out the credit card companies yet again.

“I called them and asked, ‘Why, after being a good customer for so many years, why such a huge jump from 4.99 percent to 13.99 percent, and they just said they were re-evaluating everyone and everyone was going up,” says Joe, a longtime customer of Capital One.

The credit card company isn't willing to budge on the increase. Capital One tells us they haven't raised rates since 2007, so they did a mass review of customer accounts. 

Some cardholders will see a new interest rate as high as 22.9%.

“You can opt out and keep that 4.99% rate and pay it off at that rate, but then they close your account -- and once you do that, your credit history goes down because it looks like they cancelled the card on you,” Joe says. “You're really stuck between a rock and a hard place.”

Closing the account will also eliminate any unused portion of your line of credit; for example, if you had a $5,000 balance on a card with a $10,000 limit, closing the account will reduce the available credit to $5,000 -- making it appear to creditors that your account was maxed out when it was closed.

Clearly, the best choice is to pay off the card, but most of us can't afford to do that.  So you may want to call around to other companies and see if you can get a lower rate and transfer the balance.  If you can't do that, just try to pay down what you can on the card as soon as you can. 

The new laws about credit card rates that would prevent this don’t go into effect until 2010 because they were set up during the credit crunch, and lawmakers gave them some time.

Capital One isn't the only company doing this; many American Express and Chase Bank customers also found themselves socked with huge increases in their credit card rates.

We checked with lawmakers concerned about this loophole; Congressman Dan Maffei says the Financial Services Committee he sits on is drawing up legislation that addresses some of these issues now, and the committee is hoping to get it passed and enacted sooner than July of next year. 

Sen. Schumer statement

“We can’t let consumers get bilked by credit card companies – especially when we face such a tough economic climate. It is outrageous that credit card companies induce people to make mistakes and then jack up the interest rates. We need tough legislation to stop this and the many other tawdry practices and this is just the legislation that I've introduced."
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