New Citibank Changes allow 30% Interest rate on credit cards

[David Farber <dave () farber net>]

Begin forwarded message:

From:
Date: May 30, 2005 6:28:01 PM EDT
To: dave () farber net, frisbee2 () yahoogroups com
Subject: New Citibank Changes allow 30% Interest rate on credit cards


Please strip my e-mail address if you forward this out.

I have (maybe not for much longer if I find a decent alternative) an  
AT&T Universal card, owned by Citibank.

I usually pay on time and have excellent credit, but I was troubled  
by what I read in their latest changes in terms. Although the fact  
that they have the right to do this does not guarantee they will -  
but the fact that they can scares me greatly. To me 30% APR is  
usurious and should be limited to only the most extreme cases, it  
should not be a 'normal alternative' if a customer is one hour late  
on a payment.

Basically, Citibank has a 'two tiered' interest rate one for 'normal'  
and one for 'default rate'. I understand raising the rate for  
perpetually delinquent customers:

        ---- From their latest Changes document ----
...

"Default Rate: All of your APRs may increase if you default under any  
Card Agreement that you have with us because you fail to make a  
payment to us when due, you exceed your credit line, or you make a  
payment to us that is not honored. In these circumstances, we may  
automatically increase your APRs ... ANNUAL PERCENTAGE RATE is  
29.97%..."

------

Basically as a non-lawyer I interpret this as follows. IF ANY of the  
following happen then they can INSTANTLY raise your rate to 30%, with  
no obvious:

1: The post office accidentally takes an extra few days (or worse  
loses) your on-time payment.

2: Your bank accidentally or incorrectly bounces a check you made for  
your credit card bill.

3: When making a purchase, if Citibank incorrectly allows a purchase  
which puts you over your limit.

I did NOT however see a clause that gives them the right (which I  
have heard Capital One USES) to up your rate if you are late to pay a  
DIFFERENT credit card, even if you are on-time with theirs.

Aren't there any laws which prohibit rates that high?
Is there any legal recourse, say if your payment was delayed due to  
the post office, and they raise your rates anyway?

-Eric


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