Kanjorski Urges Credit Card Companies to Maintain Reasonable Rates

WASHINGTON - Today, Congressman Paul E. Kanjorski (PA-11), the Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, sent letters to the CEOs of Capital One, Citigroup, Bank of America, and J.P. Morgan Chase expressing serious concern about reports of recent interest rate increases, especially for individuals who pay their credit card bills on time.  Chairman Kanjorski urged the companies to allow customers to access credit at reasonable rates, especially considering that the banks received taxpayer assistance to keep credit available through the Troubled Asset Relief Program.

Additionally, Chairman Kanjorski strongly supported and voted for H.R. 5244, the Credit Cardholders' Bill of Rights, which passed in the House on September 23 and is waiting on Senate action.  The bill provides crucial protections against unfair, but unfortunately common, credit card industry practices.  Among other things, it ends unfair, arbitrary interest rate increases, by requiring ample notice before rate hikes and permitting lenders to raise rates on existing balances only if minimum payments are more than 30 days late (except for increases caused by changes in stated variable and introductory offers).

The text of Congressman Kanjorski's letter to Capital One, Citigroup, Bank of America, and J.P. Morgan Chase follows:

The purpose of this letter is to express my serious concerns about recent reports of increases in interest rates on credit cards, especially for those individuals who have played by the rules and paid their credit card bills on time.  I appreciate your attention to this matter.

In recent days, I have received many calls and emails from my constituents expressing their concerns about increases in their credit card interest rates.  Specifically, these individuals have indicated that they have received letters from their credit card issuers notifying them of changes in the terms of their credit card agreement.  In some cases, these letters indicate that interest rates on credit card balances will increase by more than 6 percent, even though the card holders have paid their bills on time.

For many, these increases could not come at a worse moment.  Earlier this month, noted economists announced what many already knew -- that our country is in a recession and has been for the last year.  At a time when many Americans are facing increased financial difficulties as a result of this recession, credit cards can provide them with a safety net in the event of an emergency, such as a medical incident, a car accident, or home repairs.

Moreover, many of my constituents have specifically raised serious concerns that financial institutions receiving billions of dollars in taxpayer money through the Troubled Asset Relief Program (TARP) are now raising interest rates on average Americans, the very same Americans who pay federal taxes to support the activities of the TARP.  I share their well-founded concerns.  In my view, individuals who have maintained good credit and who have worked to make their payments on time should not have to face increases in their interest rate in order to increase the income of a financial institution receiving direct support from the federal government.

Because your financial institution has received support from the TARP's Capital Purchase Program and because your company is also a major credit card issuer, I would like to learn more about whether you have increased rates on cardholders in recent months or whether you plan to do so in the months ahead.  If you have increased rates or plan to increase them, please inform me by how much and provide a rationale for undertaking these increases at this time, especially for those individuals who have not engaged in practices that make them a higher risk of default. 

In addition, I urge you to do everything within your power to ensure that Americans continue to have access to credit at reasonable rates, especially as you have received assistance from the taxpayers to keep credit available.  Please therefore inform me what recent steps you have taken or soon will take to achieve this objective.  For those initiatives not yet started, please inform me of when you expect to begin implementation.

In closing, I look forward to receiving a response from you no later than December 31.  A timely response will assist in preparation of our oversight plans for the 111^th Congress.

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