Credit card companies dodging new consumer protection lawPosted: Updated:
PHOENIX -- There's a new federal law that prevents credit card companies from gouging consumers.
Part of the new law goes into effect in the next few months and prevents credit card companies from increasing your interest rate unless you're severely late.
But, as it turns out, some credit card companies are getting around the law and it's legal for them to do it.
Charles McAlpine runs a Scottsdale business where he sells some pretty cool and unique items. To increase some of the inventory inside his business called Storm Wisdom, McAlpine keeps his eyes open just in case he ever finds something to buy for his store.
"I might use a credit card," he said. "A lot of times I'm using the Internet so you use the credit card to bring that product into your store."
One of those credit cards is from Citibank and just recently Citibank sent McAlpine a letter saying they were changing their terms.
"What the terms meant was they were doubling the interest rate from 14.99 percent to 29.99 percent," McAlpine said.
His interest rate was skyrocketing to nearly 30 percent. The increase is exactly why lawmakers recently passed the Credit Card Act, which bans increasing interest rates on consumers like McAlpine unless they are late.
But McAlpine says he's never been late paying his credit card.
"I was thinking this has got to be a joke because I'm not late with them or anyone else, so why would my interest be going up like this?" he asked.
The only option McAlpine had was to opt out. In other words, cancel his credit card with Citibank and pay off the remaining balance. And that's exactly what he did to avoid Citibank's interest rate increase.
"If it's up to me, I'll never do business with them again," he said.
Consumers will be protected from tactics like this when the so-called Credit Card Act takes effect in February. However, until then credit card companies are tightening the screws on consumers before February gets here.
A word of advice, when you get your credit card statements, make sure you look through the entire envelope for any paperwork saying your terms and conditions are changing.
"To continue to provide our customers with access to credit, some of our Citi branded card customers' account terms, including pricing, will be changing. We are communicating these changes in a clear and transparent way. Also, customers will now have the opportunity to earn interest back each month for on-time payments or, as before, the choice to opt out completely."
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