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Citigroup raises credit card rates
Key Excerpts from Article on Website of Financial Times
Posted: July 4th, 2009
http://www.ft.com/cms/s/0/e1d0c610-65c7-11de-8e34-00144feabd...
Citigroup has sharply increased interest rates on up to 15 [million] US credit card accounts just months before curbs on such rises come into effect, in a move that could fuel political anger at the treatment of consumers by bailed-out banks. People close to the situation said that Citi, which is about to cede a 34 per cent stake to the US government as part of its latest rescue, had upped rates on between 13 [million] and 15 [million] credit cards it co-brands with retailers such as Sears. Citis rate increases emerged on the day the government proposed legislation to create a new regulator with sweeping powers on consumer protection and a week after the bank was attacked by some politicians for raising employees salaries. Holders of co-branded cards who failed to pay their balance in full at the end of the month saw their rates rise by an average 24 per cent or nearly 3 percentage points between January and April, according to a Credit Suisse analysis of data from the consultancy Lightspeed Research. Citis move came as the economic downturn caused record defaults among US card users and prompted many issuers to raise rates, both to cushion their losses and pre-empt the new restrictions set to come into effect in February. However, Citis increases have been larger than those of its main rivals, according to Lightspeed, which tracks about 12,000 US credit card accounts. Carolyn Maloney, Democratic representative for New York, the author of the new rules that will sharply constrain lenders ability to raise rates for risky borrowers, criticised Citis move. Its hard to tell if rate hikes on existing balances being put in place now are the result of prior bad business decisions or getting in under the wire of the new law, Ms Maloney told the Financial Times.
Note: Evidently one of the key effects of the forced multi-billion-dollar bailout of Citibank by US taxpayers has been to enable the bank to continue to gouge the public with exorbitant interest rates. This is called "saving the financial sytem." For lots more on the realities of the Wall Street bailout, click here.
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