Wells Fargo & Co. will raise its interest rates on majority of its credit card customers before the Credit Card Accountability Responsibility and Disclosure Act takes effect.
A bank executive said the bank is now informing its customers that this change will take effect on November 30, a day before House Financial Services Committee Chairman, Barney Frank, pushes for a halt in fee hikes under the Credit Card Law. Frank seeks to move its effective date from February 22 to December 1 to counter possible increases by card providers.
Kevin Rhein, group head of card services, said that the bank has been contemplating fee increase for a long time. It is also eliminating over-limit fees imposed upon customers who exceeded credit lines. The bank has already reached a point where it could not offer credit cards at the current price and keep credits flowing. Rhein refused to comment on whether the bill had a bearing on the timing of the bank's increases.
Being one of the largest US card providers, the company accepted $25 billion from the government's bailout program.
In a letter to Frank and Senate Banking Committee Chairman, Christopher Dodd, Bank of America says it will not increase its rates on customers in good standing until this Credit Card Act takes effect.
Credit Card Act will limit rate increases and require transparency to lenders. Dodd, a Connecticut democrat, encouraged other card issuers to follow the lead of Bank of America, which is the largest US bank by deposits and assets.
Spokeswoman, Lisa Westermann, said this change will not affect customers who signed on within the past year and those whom the bank gained from acquiring Wachovia Corp.
Wells Fargo increased 60 cents or 2.1 percent last October 7 in the New York Stock Exchange composite trading. Their shares fell last year.
Bank of America spokeswoman, Betty Reiss, said the bank raised its rates on a few customers in June before they knew of the final outcome of the Credit Card legislation. The bank may increase its rates on card holders who are late on two or more payments within twelve months.
JP Morgan increased its fees and charged higher minimum monthly payments after President Barack Obama signed the law in May. Spokeswoman, Stephanie Jacobsen, said in an email that the bank will comply with the law's provisions when it becomes effective.
Capital One Financial Corporation, third largest visa card provider, admits full compliance with the law including its provisions. A spokesperson of Discover Financial Services said their customers have already been notified of rate increases. The financial institution has already eliminated pay-by-phone fees, over-limit fees, and default pricing on existing balances.