A Senate hearing today called up executives in the credit card industry to defend their anti-consumer practices, their explanations provoking laughter from the crowd.
The bank’s defense concept of “trailing interest” was one such occasion for comedy. Under this scheme, if an individual owes $5,020 and pays $5,000 of it, next month they pay interest on the full $5020, not just the $20 owed. Reports Consumer Affairs:
Bruce Hammonds, president of Bank of America Card Services, Richard Srednicki, chief executive officer of Chase Bank USA and Vikram Atal, Chairman and CEO of Citi Cards, all said that “trailing interest” is a practice shared by various lending schemes but gave no specific examples.
Fees are only allowable to the extent they cover costs incurred by the business. They are not a money-making mechanism. The miraculous realization of this fact, after Senate prodding, is why many large lending institutions are getting rid of some of these ridiculous fees. Only continued inquest, however, will ensure that real reform is enacted and that bank’s aren’t just throwing out a minor compromises to placate the committee. — BEN POPKEN