Credit card issuers Bank of America, Citi, and Chase responded to a U.S. Senate panel’s tough look at their industry.
On March 7, 2007, a U.S. Senate panel told credit card issuers that they need to change their practices associated with late fees, penalty interest and disclosure. The panel said it would keep a close watch on the credit card industry, charging that its practices keep millions of U.S. consumer in debt.
In response, credit card issuers noted that in many instances they have already made changes. The credit card companies stated that their business offers a needed consumer service that carries risk, adding that credit card industry innovations have been beneficial to customers.
Bank of America’s president of card services highlighted the difficulty of making an unsecured loan in a fraction of a second as the cardholder waits at a merchant’s checkout. Separately, he indicated that the effective elimination of annual fees, universal acceptance of interest-free grace periods, and 0 percent interest rate loans are just several instances in which millions of consumers have been aided by industry innovations that stemmed from competition.
The head of Citi Cards also stressed the fact that with each credit card purchase, the issuers are in effect making an unsecured loan.
Addressing the Senate panel’s targeting of specific credit card industry practices, Bank of America’s president of card services said BofA has never taken part in universal default or double-cycle billing.
Meanwhile, Citi said it is ending universal default, admitting recognition of why customers and others would question the practice. Citi is also abandoning the practice of “any time any reason” changes to credit card terms at any point. The head of Citi Cards labeled the conclusion of these practices a “sea change” for the credit card industry.
Separately, the chief executive of Chase Card Services acknowledged Chase’s intention to change its over-limit fee policy, also noting that Chases owes its customers “clear and simple rules of the road.”