Posts Tagged ‘bank of lies’
Bank of America to Raise Fee on Credit-Card Transfers
April 15 (Bloomberg) — Bank of America Corp., the third- biggest U.S. credit-card lender, is boosting fees on transfers of card balances amid growing criticism of banking practices.
The fees will rise to 4 percent of the sums transferred from 3 percent on June 1, according to a notice mailed to customers. The change reflects increasing costs for the Charlotte, North Carolina-based bank, spokeswoman Betty Reiss said in an interview.
Credit-card lenders have boosted fees and interest rates as U.S. unemployment rose to 8.5 percent in March, the highest since 1983. Defaults on credit cards historically rise and fall with the jobless rate, and Bank of America reported $182 billion in card loans as of Dec. 31, according to data from American Express Co. The bank wrote off $11.4 billion of uncollectible card balances last year.
“They have stuck their neck out in this market by going to a 4 percent fee,” said Linda Sherry, director of national priorities at Consumer Action, a San Francisco nonprofit group that tracks credit cards. “Companies are experiencing a great number of defaults and they feel they have to make it up.”
Bank of America said yesterday it’s rescinding an increase in overdraft fees, keeping them at $35 per item instead of $39. It’s also waiving three months of monthly account maintenance charges for some customers who are jobless. The Center for Responsible Lending, a consumer group in Durham, North Carolina, has said banks that took U.S. bailout money are undermining the goal of reviving the economy when they raise fees.
Competing Banks
Discover Financial Services, the Riverwoods, Illinois-based credit-card lender, also plans to increase its balance-transfer fee to 4 percent, according to a March 24 report by industry publication creditcards.com. Discover has charged 4 percent on some transfers, though its current rate is 3 percent, Mai Lee Ua, a company spokeswoman, said in an e-mail today. “We don’t disclose future pricing strategies,” she said.
Citigroup Inc., ranked first by loans in the American Express data, and No. 2-ranked JPMorgan Chase & Co. still charge 3 percent on balance transfers, according to spokesman Sam Wang of Citigroup and Stephanie Jacobson at JPMorgan. Both banks are based in New York.
Consumers typically transfer balances to take advantage of lower interest rates offered by a competing bank, and the smaller payment may help them stay current on their bills. Balance transfers, once free, have carried a 3 percent charge for years, with some lenders periodically waiving the fee to attract customers, said Bill Hardekopf, chief executive officer of LowCards.com, a Birmingham, Alabama research firm.
Consumer Protection
Lenders typically charge a minimum fee of $10 with no maximum, he said. Most banks don’t disclose revenue from balance transfers. Card issuers on average earn 39 percent of revenue from fees, with the rest coming from interest payments, Hardekopf said.
Card companies are slashing credit limits, with industry analyst Meredith Whitney predicting a $2.7 trillion decline in credit-card lines by the end of 2010. Their efforts to raise fees may be stymied as Congress considers limiting rates and preventing companies from making unilateral changes to the terms of agreement.
The Federal Reserve has drawn up new rules to protect consumers scheduled to take effect in July 2010, and analyst Kathleen Shanley at bond-rating firm Gimme Credit LLC said in an April 6 report that the industry must “cope with a regulatory environment that has turned more consumer-friendly.”
Christopher Dodd, chairman of the Senate Banking Committee, said on March 31 banks were using lax rules to “gouge” customers, and House Financial Services Committee Chairman Barney Frank said in a Bloomberg Television interview today that curbs on credit-card “abuses” are among his panel’s priorities.
The American Bankers Association and nine other business groups sent a letter in March to lawmakers warning of credit contraction if a restrictive bill is approved.
To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net
