Last year, Citi promised its credit card customers that “A Deal is a Deal” – that they would be getting rid of “any time for any reason” interest rate hikes. But now that they’re facing financial problems, Citi is reconsidering this pledge. Ed Mierzwinski made the SNL connection in his blog at US PIRG, noting that Citi might “emulate Gilda Radner’s famous SNL character Emily Litella and say ‘oh, never mind,’ whenever they want to change rates and terms on otherwise good customers.”
Today’s New York Times ran this article about Citi’s impending flip flop. The Times speculates that the approach hasn’t helped their bottom line because “consumers don’t recognize the benefit, in part because of the difficulty deciphering the fine print among offers from different banks.” I’d also bet that Citi’s pledge to refrain from this abuse wasn’t bringing in new customers because people don’t understand its prevalence among other card companies. It’s hard to comparison shop when you don’t know what to compare.
Bank of America certainly hasn’t held back from using “any time for any reason” interest hikes, as many of the recent comments flooding the Federal Reserve Board show. It seems that about one in four of the comments from AFFIL members goes something like this: “I have a Bank of America credit card, and they recently raised my rate from 9% to 28%. When I called for an explanation, they said something vague like I’ve become a ‘riskier client.’” One comment suggests that Bank of America is raising rates for the sheer purpose of raising profits, a theory also suggested in this MSN Money article. Interestingly, there are only a handful of complaints about Citi cards from AFFIL members to the Fed.
Citi’s inability to cash in by being a squeaky clean (or at least cleaner) lender shows that market forces alone aren’t enough to entice lenders to stop using the worst practices. Citi’s bold move isn’t paying off; the race to the bottom prevails. That’s why consumer advocates have said all along that the only way to permanently get rid of “any time for any reason” clauses is to outlaw them.