Connecticut Attorney General Richard Blumenthal is urging the Federal Reserve Board to return credit card interest rates and fees to year-ago levels after banks raised them in response to new federal rules and surging credit costs.
He said the American Bankers Association 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 Fed Chairman Ben Bernanke, Blumenthal urged the central bank to use rulemaking authority under the Credit Card Accountability, Responsibility and Disclosure 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 wrote.
The law, which includes restrictions on credit card companies' rate increases on existing balances, was passed in May and goes into effect Feb. 22. Until then any interest rate increase can apply to both future purchases and current balances. After Feb. 22 companies can raise rates on future transactions but not on current balances unless card holders are at least 60 days behind in payments.
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, Blumenthal said.
The law is expected to wipe out more than $50 billion of annual revenue for banks by curbing 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.
Banks have drawn fire because they were supported by hundreds of billions of public bailout dollars in late 2008 and 2009.