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Citi Finds A Way Around Credit Card Rules

Here’s a trick Citibank pulled before the Credit Card Accountability and Responsibility Act took effect last month in an effort to circumvent the new regulations.

Here's a trick Citibank pulled before the Credit Card Accountability and Responsibility Act took effect last month

Two of the act’s most important provisions require credit cards to:

  • Provide 45 days notice before raising rates, and the new higher rate can’t be imposed on existing balances, just new purchases.
  • Wait until customers are 60 days behind on their payments before imposing a higher penalty rate on their accounts.

But Citi mailed a change of terms letter to some customers before the act took effect telling them that they qualified for a special discount rate of 8.99% unless they pay late.

Miss a deadline by just a day or two and the rate soars to a stratospheric 29.99%.

Citi can do that because rates that are clearly labeled as part of a special or introductory deal aren’t covered by the new rules.

The 29.99% can also be imposed on existing balances because it was the full, non-discounted rate when the Credit CARD Act took effect.

Bottom line: These terms allow Citi to slap delinquent cardholders with penalty rates almost exactly as it did in the pre-Credit CARD Act world.

“The difference between people who could pay late by a day or an hour and people who are seriously delinquent is a huge difference,” says Heather McGhee, director of Demos, a non-partisan public policy research and advocacy organization.

“It’s so easy for working families to pay a bill late by a day or even by an hour. This practice is targeting those accidental late payers.”

If you have a Citi card, take a look at your most recent statement or any change of terms agreement the bank may have sent you earlier this year.

If you have a discount rate, you need to know that you’re still subject to abruptly higher charges despite the new federal regulations.

Comments (4)
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4 Existing Comments
  1. Super Villain said:
    on March 26th at 01:08 am

    CitiCards did this to me, i payed my payment one day late and my rate went from 9.45% to 29.99% and a $39.00 fee, I will be moving my business somewhere else, I always pay my balance in full every month and this was the 1st time I was late on my payment in 3 years of business with them, including my mortgage and my girlfriends car loan and a checking account. Does anybody know anything that I can do to fight this?

  2. RacerX said:
    on April 16th at 08:04 am

    Funny, I just got “that letter” in the mail from these schmucks. I’ve had the card for over a year, pay my balance every month, charge most of my business expenses on it–and this is the thanks I get: higher interest rate and I got “dinged” last month due to a late payment (1 day).

    I’m dumping these F-ers too..

  3. matt said:
    on April 27th at 10:00 am

    call them and ask them to reverse that. I did that 2 times and even got the late fee refunded. Just ask them POLITELY.