Citibank Shows The Need for Credit Consumer Protection

Ed Myska, the executive VP of El Segundo's Bank of Manhattan, recently received a letter from Citibank informing him of the interest rate increase in their cards. Citi said the hike will allow them to provide customers access to credit.

Myska seldom carries a balance - but now he is planning to burn off mileage accumulated on his plastic and switch to another card.

After the Credit Card Accountability, Responsibility and Disclosure Act was signed, lawmakers are now weighing legislation that would accelerate introduction of the credit card reforms to December 1, as banks are charging customers with higher fees and less-favorable contracts.

Lawmakers assert that speeding up the law could be beneficial to consumers by providing protection earlier than scheduled. The sole reason lawmakers are pressuring card issuers is that banks have proved themselves unworthy of customers' trust.

With new regulations to protect consumers, banks are walking away from cards that are too generous, even if it means canceling accounts of those who pay on time.

Some customers reveal that they are getting solicitations from other banks encouraging them to open up a new account.

Chase spokesman Tanya Madison said that the bank plans to make some changes to pricing and terms based on borrower risk, the conditions of the market, and the company's costs of making loans. She said the bank was evaluating changes required because of pending regulations. The credit card act requires to give customers at least forty-five days' notice of any significant change to their terms and to give card holders at least twenty-one days to pay bills each month.

The law also bans issuers from boosting interest rates in the first year following the creation of an account, prohibits banks from raising fees on existing balances, and requires that an increased interest rate charge return to its former level of card holders pay on time for six months after a missed payment.

Some financial institutions and firms wanted to get ahead of the law by increasing their rates or converting fixed-rate cards to variable rate-plastic. Others changed card holders' credit limit and altered contract terms.

In August, Citi introduced an annual fee for cards that did not carry fees in the past. Card holders were advised that they could pay as much as $90 every year, unless they use their cards for at least $2,400 worth in purchases.

A Citi spokesman declined to comment on the fee details. Some banks said they are planning to charge "inactivity fees" for cards that are not used enough.

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.