More than a million Bank of America credit card customers are being notified that they’ve received a reduction in their interest rates, thanks to a provision in the new credit card law.
Initially, the Credit Card Accountability Responsibility and Disclosure Act of 2009 prompted many issuers to hike rates, curtail lines of credit and make plastic less available.
But under Federal Reserve rules, if a credit card company increases a consumer’s annual percentage rate, it must re-evaluate that rate increase every six months, and, “if appropriate,” must reduce the rate within 45 days after completing the evaluation. Many of the Fed’s new rules took effect August 22, 2010.
A reason that Bank of America consumers are beginning to get word now: The Fed’s rule requires that rate increases imposed between Jan. 1, 2009 and Aug. 21, 2010, first be reviewed before Feb. 22, 2011.
“More than 1 million accounts received a rate reduction in February as a result of improvements to their credit profile,” Bank of America spokeswoman Betty Reiss said Wednesday.
Says Greg McBride, senior analyst with Bankrate.com: “The CARD Act helped level the playing field for consumers in many ways, one example being that interest rate changes can go both ways instead of being a one-way ticket to higher interest costs.”
The provision could make a real difference for cardholders, said Bill Hardekopf, chief executive of LowCards.com.
“Since January 2009, millions of cardholders saw their interest rates increase. Some issuers raised rates to as high as 29.9 percent for cardholders with good credit. These higher rates shocked cardholders and they want their APR restored to the original rate,” Hardekopf said. “However, the catch in this is two words, ‘if appropriate.’ The final decision is left with the card issuers. Credit card issuers need revenue and they may not be eager to restore the original rates.”
To read the Fed document, click here.
