Monday, Nov. 17
Posted 11 a.m.

Citi to raise APRs

Bankrate reporter Leslie McFadden contributed this entry.

Last week, Citigroup revealed it will raise the interest rates of some credit cardholders whose rates haven't increased in two or three years. According to an article in the Wall Street Journal, affected cardholders will see their rates rise by an average of 3 percentage points.

Customers will receive notification with their November statement or in a separate mailing if they get statements online. They can opt out of the rate hike and keep using the card under the old pricing terms until the card expires.

Citi is repricing some customer accounts "in order to continue lending in this environment," says John Carey, chief administrative officer of Citi's credit card division. The bank suffered a net loss for the third quarter of $2.8 billion.

"The industry has recently experienced an unprecedented market cycle with severe funding dislocation and significant consumer credit deterioration driven by the mortgage crisis and rising unemployment," he says.

Several weeks ago, American Express also pledged to raise some cardholders' rates by 2 to 3 percent.

In these tough economic times, it's not enough to pay on time. Keep balances as low as possible, so as not to red flag your account for a rate hike. If you notice a change in your APR or credit limit, call the issuer and negotiate to get the old terms back. Use competitive offers as leverage, if necessary.

Comments? Questions? E-mail plastic_rap@bankrate.com.

Thursday, Nov. 13
Posted 11 a.m.

OCC rejects proposal for debt relief program

Bankrate reporter Leslie McFadden contributed this entry.

In a letter to the Consumer Federation of America and the Financial Services Roundtable, the Office of the Comptroller of the Currency responded to a proposal that would have created a workout program for credit cardholders facing bankruptcy.

"The OCC denied our request," wrote Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, which represents financial services companies, in an e-mail. "We will continue to look for ways to help consumers in these extraordinary times."

The proposed pilot program would have allowed qualifying borrowers to get up to 40 percent of their debt discharged and five years to pay back the balance without paying any interest. Banks would not recognize a tax loss for the written-off debt until after the five-year period expired.

The OCC took issue with the lag time in reporting the written-off debt as a tax loss. The deferral of loss recognition "would comprise the transparency and integrity of the banking financial reports and could lead to a loss of public confidence in the banking system," says Kevin Mukri, spokesman for the OCC. People would get a skewed picture of how a bank's loans were doing if the reporting of credit card losses wasn't accurate.

"When the loans are performing, the banks report that the loans are performing; when they're having issues with loan portfolios, they make that public. When loans go bad they make that public too," he says.

Banks can already write off debt if they report the losses, and they can take a variety of actions to help struggling borrowers, such as lowering interest rates and suspending fees. Mukri urges consumers to reach out to their lenders even if they just expect to have trouble paying their bills. "If you anticipate a problem -- even if the problem doesn't develop, it's good to contact the financial institution and let them know what's going on," he says.

Comments? Questions? E-mail plastic_rap@bankrate.com.

Friday, Oct. 31
Posted 2 p.m.

Banks giving debt relief?

Bankrate reporter Leslie McFadden contributed this entry.

Lenders want to give some people a break on their credit card debt.

You read that correctly.

The Consumer Federation of America and the Financial Services Roundtable petitioned the Office of the Comptroller of the Currency this week to approve a pilot program that would provide debt relief for credit card borrowers that don't qualify for traditional repayment plans.

"Virtually all of the largest national credit card banks" are on board, according to the letter sent to the OCC.

Qualifying cardholders would see up to 40 percent of their credit card debt discharged, and would get five years to pay off the remaining balance at a zero percent interest rate, says Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable, which represents financial services companies. The program would also defer the tax liability on the discharged debt until after the five-year period ended.

Banks suffering from rising delinquencies and charge-offs, of course, would also benefit from the program.

"From the lenders' side, these are at-risk borrowers who are unable to pay a portion of their credit card debt, and so it would give us the lenders the opportunity to receive some payment on the debt. We would not recognize a tax loss for the written-off portion until the end of five years," Talbott explains.

If approved by the OCC, banks could then begin implementing the 18-month program for 50,000 credit cardholders. Credit counselors would recommend people for the program on a case-by-case basis. Borrowers with high enough incomes would get steered toward a traditional debt management program, and those unable to repay debts would likely still face bankruptcy.

"But if the borrower is in the sweet spot -- has income but is struggling, but is at risk -- then the credit counselor would recommend them for the program," says Talbott.

As of this morning, the OCC is still reviewing the proposal.

More details to come.

Comments? Questions? E-mail plastic_rap@bankrate.com.

Click here for the Plastic Rap archive