Hearing on Unfair Credit Card Practices

Millard Glasshof of Milwaukee, Wisconsin, is a senior citizen living on a fixed income.  For years he faithfully made a $119 monthly payment to Chase to pay off a credit card debt that is now about $4,800.  In December 2006, a year ago, out of the blue, Chase decided to hike his interest rate, from 15% where it had been for years, to 17% and then in February to 27%.

Why?  Chase had decided to conduct an automated review of all it closed credit card accounts where balances were being paid off.  Because that automated review found that Mr. Glasshof’s FICO credit score had dropped, it hiked his rate.  Think about that.  His account was closed.  He made no new purchases.  All he did for years was send in his payments like clockwork.  But his interest rate was automatically hiked from 15% to 27%.  Not only that, to rub salt in the wound, the new 27% rate was applied retroactively to his existing credit card debt, and his finance charges skyrocketed.

Under the 27% interest rate, out of his $119 monthly payments to Chase, about $114 went to pay for finance charges and only $5 a month went to pay down his principal debt. 

Opening Statement of Senator Carl Levin
Hearing on Unfair Credit Card Practices:
Unfair Interest Rate Increases
December 4, 2007