U.S. PIRG Consumer Blog: Credit card companies show remorse to head off regulation

Today, according to Kathleen Day's story in the Washington Post, Chase Card's CEO will apologize at a Senate hearing to Ohio resident Wesley Wannemacher for "charging him $7,500 in interest charges and late fees on purchases of $3,200." Last week, Citibank announced it would end two sordid practices. What's going on? Are we living in Superman's Bizarro World, where everything is backwards? Is owning a credit card company no longer a license to steal, but all of a sudden an altruistic venture?

No, nothing that complicated or moral. What's happening is that Congress is finally taking a hard look at the credit card industry. The industry is simply taking minimal prophylactic steps to deter actual reform legislation and protect the most profitable form of banking, credit card banking. Today, Senator Carl Levin's Permanent Subcommittee on Investigations holds an oversight hearing to follow up on the results of a GAO investigation it released last fall. We've signed on to testimony by Alys Cohen of the National Consumer Law Center. We also have issued a news release and detailed reform platform jointly with several groups. More:

What unfair practices has Citibank promised to stop?

The first promise: it would no longer raise your credit card rates under the so-called "universal default rule." That's the one where you make all your payments to Citibank on time, but you were allegedly late to someone else. It had nothing to do with risk, and everything to do with squeezing more profits out of consumers.

The second: It would stop raising rates and changing terms for any reason, including no reason. Yes, incredibly, that's allowed by regulators.

These are useful promises by one company, but Citi's goal, and Chase's, too, is simply to deflect potential legislation. See our testimony and detailed reform platform above for details on what needs to be done.

Oh, and by the way, if you catch Citibank breaking its new promises, you cannot take them to court. There's another clause in your credit card contract that says you've got to go to binding mandatory arbitration instead.