The AgonistThis is an extremely foolish decision by Bank Of America. One right up there in the annals of corporate stupidity like that of Circuit City firing its most experienced employees. From Business Week:
Credit-card issuers have drawn fire for jacking up interest rates on cardholders who aren't behind on payments, but whose credit score has fallen for another reason. Now, some consumers complain, Bank of America (BAC) is hiking rates based on no apparent deterioration in their credit scores at all. . . The major credit-card lender in mid-January sent letters notifying some responsible cardholders that it would more than double their rates to as high as 28%, without giving an explanation for the increase, according to copies of five letters obtained by BusinessWeek. Fine print at the end of the letter—headed "Important Amendment to Your Credit Card Agreement"—advised calling an 800-number for the reason, but consumers who called say they were unable to get a clear answer. "No one could give me an explanation," says Eric Fresch, a Huron (Ohio) engineer who is on time with his Bank of America card payments and knows of no decline in the status of his overall credit.
As Mish notes, consumers will penalize BoA for this. In a big way:
Tactics Guaranteed To backfire
* The sudden rate hike will throw some consumers so far behind the curve, they simply give up. In other words, defaults may soar on account of their actions.
* Some customers will find a better rate elsewhere.
* Some customers with multiple cards will stop using their Bank of America card.
* Some customers will vow to get out of the debt trap because of these rate hikes, and manage to do just that.
* Congress won't sit for these actions.The gods punish greed and hubris of this sort in extremely painful ways. Bank Of American will deserve what it gets. Read on...
It's not the only way BofA nickel and dimes its consumers. Would that our government spend a little more time looking at predatory practices like this that hurt consumers and by extension, the economy.
