Connecticut Attorney General Richard Blumenthal is urging the Federal Reserve to reverse credit-card interest rates and fees to year-ago levels as banks have hiked them amid new federal rules and surging credit costs.
He said the American Bankers Association, the largest U.S. banking group, admitted in a letter to his office that big banks are imposing enormous increases on low-risk consumers to recoup huge, self-inflicted losses.
In a letter Monday to Federal Reserve Chairman Ben Bernanke, Blumenthal urged the Fed to use rule-making authority under the Credit Card Act of 2009 to roll back the interest rates and fees to January 2009 levels. "The banks are compelling creditworthy consumers to rescue them twice--once through taxpayer-funded bailouts and a second time through exorbitant credit card interest rates and fees," he said.
The new law, which restricts credit card companies' right to raise rates on existing balances and imposes other curbs, was passed in May and goes into effect Feb. 22. Some of the biggest U.S. credit-card issuers have increased card fees and interest rates on existing balances to as high as 30%, even for consumers with spotless credit.
The law is expected to wipe out more than $50 billion in annual revenue for banks by limiting certain business practices. For example, the rules will limit some interest-rate increases, require more disclosure to customers and prohibit banks from raising interest rates on current balances unless a customer is at least 60 days behind in a payment.
The changes come against a backdrop of anger at the nation's banks because they were supported by hundreds of billions of public bailout dollars in late 2008 and 2009.