Credit Card Interest Rates
By Kurt O'Keefe, Attorney at Law on Nov 25, 2007 in Michigan
Chase has decided to help the little guy and cease raising interest rates when the cardholder’s credit score declines. More on this new development was also reported on our sister site, Credit Law Network.
This lovely predatory practice allowed Chase to impose penalty interest rates on card holders who had never been late, were under the limit, and had otherwise done everything they were supposed to.
The problem with the business model for the credit card industry is that it only becomes profitable when you default on the terms of the credit card contract. In order to increase profits more, particularly those generated by penalty interest rates, in the last few years, it has become industry practice to jack up the rates when your credit score declines, for whatever reason.
Being that the credit card contracts are, of course, written by the credit card company, they have included provisions allowing unilateral modification.
In plainer terms, they change the contract when they want to.
Given the inaccuracy of the credit reporting agencies, your credit score could decline for improper reasons, you may have not done anything wrong with any of your other creditors, and still been stuck with the higher penalty interest rate.
Credit scores can fall due to other creditors checking your report, whether you applied for new credit with them or not.
Only a cynic would think Chase’s move has anything to do with pending legislation in Congress.
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