Good News on Credit Card Terms

Earlier this week, Bank of America (BofA) Director of Federal Government Relations wrote to Senator Chris Dodd, who’s chairman of the Senate Banking Committee. The letter said that the bank “…will not implement any change in terms (risk or economic based) re-pricing of consumer credit card accounts between now and the effective date of the CARD Act.”

In response, Senator Dodd said: “Every other credit card company should follow suit. This Congress has made it clear that abusive credit card practices are no longer acceptable.”

Not Such Good News on Credit Card Terms

Just days later, Wells Fargo & Co. unveiled its plans to hike the credit card rates it charges its customers by three percentage points.

What’s Going On? Credit Card News

All of this activity is a result of the new Credit Card Accountability, Responsibility, and Disclosure (CARD) Act. Although the bill was signed into law in May, it isn’t due to go into effect until February 2010.

The Act gives credit card issuers a nine-month window during which to do whatever they liked. So many lenders have taken full advantage of this that legislators are considering bringing the law’s implementation forward to December 1 2009.

And–although nobody’s admitting as much–some wonder whether that is why Wells Fargo chose November 30 as the date on which its new credit card rates would take effect.

The Small Print in Bank of America’s Promise

Not everything’s rosy for BofA customers. Earlier in the year, the issuer (along with Chase) changed its credit card terms, switching most of its customers from fixed to variable interest rates.

So the bank’s promise to Senator Dodd doesn’t prevent it from adjusting variable-rate cards in line with changes in the Prime Rate. And, interestingly, when BofA says “prime rate,” it isn’t talking about the Fed’s.

According to its website, “The Prime Rate is set by Bank of America based on various factors, including the Bank’s costs and desired return, general economic conditions and other factors….”

Since December of 2008, BofA’s prime rate has been 3.25 percent.

But the Big Print’s Still Welcome

None of this detracts much from what is essentially good news for BofA customers. Indeed, it appears to be part of a concerted effort on the part of the bank to transform itself into a more customer-friendly institution. Certainly, this week’s move on credit card rates followed an announcement just last month of welcome plans to help BofA banking customers avoid excessive overdraft charges.

Will Others Follow?

The credit crunch and the subsequent recession genuinely frightened many senior people in the credit card industry. And the CARD Act scared them nearly as much. Many feared that the industry would become substantially less profitable.

And much of the recent hiking of rates, slashing of limits, introduction of annual fees, and general messing with credit card terms stemmed from this fear.

But, also this week, Forbes reported that some industry analysts are predicting a return to normal business conditions for the credit card industry during 2011.

As this sinks in, perhaps more issuers will follow BofA’s lead.

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