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Bank of America on Tuesday pledged not to hike credit card interest rates or fees before a new law intended to reform industry practices takes effect in February.
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iStock Credit Cards |
Since most Bank of America [BAC
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] customers have variable rate cards, however, they could still see their interest rates go up. The interest on variable-rate cards is tied to the rise and fall of the prime rate.
The North Carolina-based bank, along with Chase, in August switched most fixed-rate cards to variable rates to manage costs in light of the sweeping new reforms to the credit card industry.
Discover Financial Services [DFS
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] moved some of its cardholders from fixed to variable rates in June.
The previous moves to variable rate cards somewhat blunts Bank of America's announcement Tuesday that it will not implement rate hikes based on a customer's risk or market conditions.
And the timing of the announcement is no coincidence.
Lawmakers had recently introduced legislation to move up the effective date of new credit card reforms by two months to Dec. 1. The House Financial Services Committee was set to hold a hearing on the legislation next week.
That earlier effective date was proposed after consumers across the country started getting notices of higher interest rates and lower credit limits after the credit card law was signed by President Barack Obama in May.
The credit card law, which goes into effect in February, will limit banks ability to raise rates and fees, and require them to give greater disclosure on the costs of borrowing.
In a release, Sen. Chris Dodd, D-Conn., urged other banks to follow Bank of America's lead and pledge not to raise rates any further until the law takes effect.
"This Congress has made it clear that abusive credit card practices are no longer acceptable," Dodd said.
A Chase representative said it "intends to be in compliance" with the law when it becomes effective. A Wells Fargo [WFC
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] representative did not immediately reply.
In an e-mailed statement, Bank of America spokeswoman Betty Riess said the decision not to raise rates "is consistent with other consumer-oriented policy changes we have made recently."
Riess was referring to the bank's decision earlier this month to stop automatically enrolling customers in overdraft protection, a practice that has come under widespread criticism in the past year.
Instead, customers who want overdraft protection for their debit cards will need to opt into the program.
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