Not completely related to bankruptcy, but most people who have filed for bk have experienced it and I just like news about credit card lenders having to explain practices that are fueled by greed 
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Ho ho ho. Just in time for the holiday spending season, members of Congress are skewering credit card companies for pushing allegedly abusive business practices on unwitting customers.
Tuesday, a panel led by Sen. Carl Levin, D-Mich., and Sen. Norm Coleman, R-Minn., will haul in executives from Discover, Bank of America (nyse: BAC - news - people ) and Capital One Financial (nyse: COF - news - people ). The lawmakers want to know why they raise customers' interest rates when those customers have a solid payment history.
The spotlight on the industry comes as Congress and the Bush administration consider regulatory fixes for the easy lending of the subprime mortgage industry. Levin says lawmakers have a "regulatory responsibility" to "end some abuses where they exist in the free market."
Give them an "A" for effort. At a separate hearing in March, the same panel, part of the Senate Committee on Homeland Security and Governmental Affairs, took on Bank of America, JP Morgan Chase Bank and Citigroup (nyse: C - news - people ) for charging interest to customers who pay their bills before the due date. Levin and Sen. Claire McCaskill, D-Mo., proposed a bill to stop lenders from charging interest for debt paid on time and prohibit interest rate hikes without the cardholder's consent.
Tuesday's hearing gives lawmakers a new chance to shame credit issuers into changing their Byzantine lending habits. They've had some success at it. Two of the country's five largest issuers, Citi Cards and Chase, recently announced they would no longer increase rates on customers who make timely payments. Now Congress wants answers from Discover, Bank of America and CapitalOne.
During a recent investigation, the Senate panel found Bank of America and Discover raised customers' rates because their overall credit scores dropped, not because of untimely payments. Moreover, the panel found neither bank could pinpoint the cause for a credit score drop because the system used to determine a score uses too many interrelated variables.
"Some contend credit card companies are repricing cardholders based on objective criteria," says Levin. "But the truth is there is a lot of arbitrariness in how interest rates are set."
The banking industry says they're not sure whether Congress' gripe is with the way the credit scores are calculated or how issuers interpret them. "It is a settled fact that a customer's performance with one or more debt obligations is predictive of whether they will pay their other bills, including credit cards," says a "fact sheet" on credit cards issued by the American Bankers Association Monday. They also argue the need to pass on expenses to customers, just like anyone else in business.
Levin is unmoved. He argues issuers should honor the rate they advertised to customers regardless of an increase in their costs, and favors more oversight of the industry's doings.
Others agree. A report last year by the Government Accountability Office found lenders often present customers with unintelligible information about the terms of their cards, and called for tighter restrictions on the practice. The Federal Reserve, which loosely regulates the industry, has proposed credit issuers make changes in terms more transparent to consumers and give them at least 45 days notice when their rate is about to increase.
And don't underestimate the effect that the subprime fiasco might have on credit card issuers. Levin says his panel hasn't yet examined the extent to which the mortgage mess has caused credit card interest rates to increase, due to falling credit scores. They'll be looking at that next.
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Ho ho ho. Just in time for the holiday spending season, members of Congress are skewering credit card companies for pushing allegedly abusive business practices on unwitting customers.
Tuesday, a panel led by Sen. Carl Levin, D-Mich., and Sen. Norm Coleman, R-Minn., will haul in executives from Discover, Bank of America (nyse: BAC - news - people ) and Capital One Financial (nyse: COF - news - people ). The lawmakers want to know why they raise customers' interest rates when those customers have a solid payment history.
The spotlight on the industry comes as Congress and the Bush administration consider regulatory fixes for the easy lending of the subprime mortgage industry. Levin says lawmakers have a "regulatory responsibility" to "end some abuses where they exist in the free market."
Give them an "A" for effort. At a separate hearing in March, the same panel, part of the Senate Committee on Homeland Security and Governmental Affairs, took on Bank of America, JP Morgan Chase Bank and Citigroup (nyse: C - news - people ) for charging interest to customers who pay their bills before the due date. Levin and Sen. Claire McCaskill, D-Mo., proposed a bill to stop lenders from charging interest for debt paid on time and prohibit interest rate hikes without the cardholder's consent.
Tuesday's hearing gives lawmakers a new chance to shame credit issuers into changing their Byzantine lending habits. They've had some success at it. Two of the country's five largest issuers, Citi Cards and Chase, recently announced they would no longer increase rates on customers who make timely payments. Now Congress wants answers from Discover, Bank of America and CapitalOne.
During a recent investigation, the Senate panel found Bank of America and Discover raised customers' rates because their overall credit scores dropped, not because of untimely payments. Moreover, the panel found neither bank could pinpoint the cause for a credit score drop because the system used to determine a score uses too many interrelated variables.
"Some contend credit card companies are repricing cardholders based on objective criteria," says Levin. "But the truth is there is a lot of arbitrariness in how interest rates are set."
The banking industry says they're not sure whether Congress' gripe is with the way the credit scores are calculated or how issuers interpret them. "It is a settled fact that a customer's performance with one or more debt obligations is predictive of whether they will pay their other bills, including credit cards," says a "fact sheet" on credit cards issued by the American Bankers Association Monday. They also argue the need to pass on expenses to customers, just like anyone else in business.
Levin is unmoved. He argues issuers should honor the rate they advertised to customers regardless of an increase in their costs, and favors more oversight of the industry's doings.
Others agree. A report last year by the Government Accountability Office found lenders often present customers with unintelligible information about the terms of their cards, and called for tighter restrictions on the practice. The Federal Reserve, which loosely regulates the industry, has proposed credit issuers make changes in terms more transparent to consumers and give them at least 45 days notice when their rate is about to increase.
And don't underestimate the effect that the subprime fiasco might have on credit card issuers. Levin says his panel hasn't yet examined the extent to which the mortgage mess has caused credit card interest rates to increase, due to falling credit scores. They'll be looking at that next.
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