Tester takes swipe at credit card industry
Senator’s legislation would outlaw unfair interest rate increases
(WASHINGTON, D.C.) – Senator Jon Tester today took a swipe at the credit card industry for raising interest rates on cardholders who pay their bills on time.
This morning on Capitol Hill Tester took part in a subcommittee hearing to address the unfair practice of increasing customers' interest rates if their credit scores fall. According to today's hearing, one credit card company even raises interest rates on customers simply because the company deems lower rates "below market."
Oftentimes, interest rates go up even for cardholders who pay their minimum amount due on time every month. Some companies even apply the higher interest rate to existing credit card debt—something Tester considers an unfair retroactive rate increase. And most cardholders don't know when their interest rates increase.
"In Montana, we expect businesses to shoot folks straight and use common sense. Big credit card companies don't do that, and they're sucking too many people dry," Tester said. "This practice targets customers who play by the rules, and it's time to change."
Earlier this year, Tester introduced legislation to outlaw the practice of "universal default"—when companies automatically change terms on a credit card account based on behavior on another account. Tester's Universal Default Prohibition Act of 2007 (S. 1309) also prohibits rate increases based on changes to information in cardholders' credit reports.
Tester said currently, credit scores can go down even if credit cardholders spend up to—but not over—their credit card limit. That, in turn, could result in interest rate increases on the customer's other credit cards.
"The whole process is painfully confusing and unfair, and millions of honest folks are in line to become victims," Tester said. "It's time to clean up the process and bring honest business back to the credit card industry. Saying that might not make me popular among executives in the industry, but it's the right thing for Montana."
The Senate Subcommittee on Investigations organized today's hearing. The subcommittee is part of the Senate Homeland Security and Governmental Affairs, of which Tester is a member.