Watch out - in Businessweek (merged)

[magyar123]

[magyar123]

[my4devils]

SO- if I am reading this right- they are raising rates in an anticipation of upcoming charge-offs. Won't this in fact cause more charge-offs as more and more consumers wont be able to afford min payments? My husband got this letter right before he stopped paying. His rates were raised to 28% and can keep on going higher- we arent paying.

[lrprn]

Here's the link to the "A Credit Card You Want to Toss" article - http://www.businessweek.com/bwdaily/...026_105146.htm

And here's the rest of the article text that was cut off in Magyar's post in case the link dies in the future -

Analysts say the bank's move is obviously aimed at shoring up profits. On Jan. 22 Bank of America reported a 95% decrease in fourth-quarter earnings due mostly to increases in loan-loss reserves for consumer credit, including rising card charge-offs and write-downs in mortgage-related securities. Bank of America faces another profit sinkhole with its pending acquisition of troubled Countrywide Financial (CFC). Portales' Ryan notes that boosting rates on existing credit-card holders is one of the quickest levers a bank can pull to try to boost earnings.

Anticipating Charge-Offs
Bank of America hasn't made it easy for consumers to reject the new rates. The letters require that consumers write Bank of America to agree to no longer use the card and pay off the existing balance at the old rate—they can't telephone to do so, nor does Bank of America provide a form or a return envelope. Moreover, consumers don't have much time to respond. Cardholders say they got the letters in the latter half of January: four of the letters obtained by BusinessWeek require a written response by Feb. 19, while the fifth requires a response by Feb. 29. If the company doesn't get a response by those dates, rates automatically rise. A response, of course, assumes consumers read the letter from Bank of America as they sort junk mail. "It's a reasonable assumption that most don't," says Karen Gross, a legal scholar on consumer credit and president of Southern Vermont College.

Bank of America also benefits from consumers who do write in an agreement to pay off balances at the old rate and not use the card again, says Nathan Powell, a credit analyst at New York-based research firm RiskMetrics Group. The bank, he says, is clearly trying to protect itself from worsening credit-card charge-offs ahead, something analysts widely expect in the card industry as the economy deteriorates. Powell says the bank must have identified a list of other credit criteria besides FICO that it is using to screen cardholders and determine it's no longer worth new business if they don't accept the higher rate. So far, Bank of America's charge-off rates have risen in line with the credit-card industry, up to 5.08% of receivables at the end of the fourth quarter from 4.57% a year ago. "The bank doesn't want to get behind the curve," Powell says.

"Unacceptable" Hikes
Bank of America is trying to get ahead of Amanda Pennington, 29, of Euless, Texas. She says the bank raised her credit limit three months ago from $5,000 to $8,000 because of her strong payment history. Then she got the letter from the bank in mid-January notifying that her rate would rise from 15.74% to 25.99%. When she called, she says, the bank told her it was raising her rate because her balance was now too high, though it was still under the higher new limit the bank had previously granted. After paying tuition for a community college course, transferring another balance, and paying for daily expenses, Pennington's Bank of America debt now stands at $7,500. Bank of America declined to comment on individual customers.

Adam Levin, CEO of Credit.com and former head of New Jersey's Division of Consumer Affairs, says he is surprised Bank of America would risk bad public relations with its rate increases, given the congressional hearings in December. The bank risks alienating new customers and existing ones by being so brazen, he says, adding, "Either Bank of America has more financial troubles than it is willing to admit or it has a level of institutional arrogance that is unacceptable."

[PaKettle]

I hope this puts a big damper on Bank of America's business! This is really under-handed and just plain sleazy of them, to raise rates like this in the way they are doing it.

I am SO HAPPY I filed bankruptcy against them! Bas**rds!

I really hope EVERYONE with a BofA credit card closes their card accounts now, and also decides not to do their banking with them!

Before we filed bankruptcy, we had a free checking account with them. Suddenly we get a mail from them that their account would no longer be free. Also, they froze my wife's checking account while she was out of the country just because she spent $10-15 here and there in several stores. NO questions asked, no phone call to our home to ask if she might be out of the country using the card, nothing! I immediately closed my account with them after these 2 events!

I hope EVERYone closes their accounts with them. They're scum.

[PaKettle]

Since BofA sees this kind of b.s. as beneficial to them, I hope people will make it NOT beneficial by closing their checking and savings accounts with BofA, too!

[lrprn]

I merged the two separate threads for the Businessweek article about BOA unfair cc practices and all the responses into one thread to keep everything in one place.

[FLBK7]

I don't have any accounts with BOA, but I'm pretty sure that they took over First USA Bank, with whom I had 3 credit cards that were discharged in my BK back in 2004. It took forever to get them to report correctly after my discharge (IIB, zero balance), but they dropped off my credit reports in time. However, their collection agencies refuse to stop reporting in spite of numerous dispute letters. I've given up trying, and know that according to the SOL they'll have to stop all reporting all activity soon. I've got to keep an eagle eye on them, though, for they constantly re-age the discharged debt!!!!!!!

[epiphany]

This is nothing new. B of A raised my credit limit from 1250 to 4250 in 2006. Of course I charged it up. I had been in good standing the whole time I had it. Then about a year ago, I got the raising rate/opt out notice. I opted out and didn't use the card for a few months. Then eventually I had to and my rate promptly went up.

I don't think they should raise rates on people who have never been late or over the limit. Or even those who are once in a blue moon but promptly make good on it. I would think that they are shooting themselves in the foot but I guess the odds must be in their favor.

EP

[epiphany]

I merged the two separate threads for the Businessweek article about BOA unfair cc practices and all the responses into one thread to keep everything in one place.

Thank you...I appreciate that because I had glanced at it earlier and was doing the back and forth thing.

EP

[AMISLANDER]

Since BofA sees this kind of b.s. as beneficial to them, I hope people will make it NOT beneficial by closing their checking and savings accounts with BofA, too!

I have banked with BOA since 1991...UGH! Now, I'm wondering with my discharge just over a year old, would other banks take me?

I, obviously do not have a BOA credit card. ha ha ha...

[magyar123]

Thanks to the posters who combined my two threads into one. Unfortunately B of A is not the only major bank starting this loanshark practice. The main reason I think is the anticipation of a Democrat becoming President and a Democrat controlled Congress next year - who will most probably reverse some of the creditor friendly provisions of the 2005 bankruptcy laws and making it easier to file. They are now lining their pockets to offset the huge losses that are on the horizon.