Is Bank Of America Of Trying To Skirt The CARD Act With New Annual Fees?
In a series of recent posts, WalletBlog has accused Bank of America of breaking the spirit of its "no new fees" promise and of potentially breaking the law next year, after it announced it will introduce annual fees on some existing credit card accounts in 2010.
Here's the blog's argument for why Bank of America isn't honoring its promise to customers and to Sen. Chris Dodd (D-CT) and Rep. Barney Frank (D-MA). On October 6th the bank released a letter in which it pledged to stop re-pricing existing credit card accounts—but introducing an annual fee where none existed before sure sounds like re-pricing, doesn't it? BoA explained it like this: they only promised to not raise interest rates.
However, that's not true. WalletBlog points out that the bank made no such distinction in their October 6th letter. Here's the relevant excerpt:
"In light of the concerns expressed to us by our customers, Bank of America will not implement any change in terms (risk or economic based) re-pricing of consumer credit card accounts between now and the effective date of the CARD Act."
That language doesn't draw any distinctions between types of re-pricing, so it's kind of weird to retroactively define the term as only relating to interest rates.
But this is a moot point because the letter only promises that they won't practice re-pricing between now and the implementation of the CARD Act. After that goes into effect in February 2010, the promise no longer applies. I don't know why BoA's representative bothered to misrepresent the language of the letter when he could just as easily have pointed out that it was nothing more than a temporary pledge—and mostly an empty once, since they had already re-priced many accounts in the month leading up to the letter.
As far as implementing fees after the CARD Act goes into effect, well, that's where WalletBlog says that BoA may end up in violation of the law. BoA argues that the CARD Act prohibits raising interest rates but says nothing about implementing annual fees, but WalletBlog points out that the language of the CARD Act is ambiguous, and thanks to a 1996 Supreme Court case involving Citibank, the FDIC considers the term "interest" to include:
...among other things, the following fees connected with credit extension or availability: numerical periodic rates, late fees, not sufficient funds (NSF) fees, overlimit fees, annual fees, cash advance fees, and membership fees.
It sounds like BoA may be testing the boundaries of the CARD Act and seeing if it can get away with annual fees by arguing that they're not specifically prohibited.
Be sure to check out WalletBlog's full post on the matter.
"Bank of America Tries but Fails to Defend New Annual Fees" [WalletBlog]
"Bank of America Readies Itself to Break the Law" [WalletBlog]
(Photo: mrkathika)
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Comments:
It doesn't really matter. BoA will just get a slap on the wrist fine, the annual fees will stick, congress will make a tiny bit of noise before realizing it's lunch time, and the customers will still get hosed in the end.
@PLATTWORX: I got that letter yesterday. All my rates are going up to 29.99%.
That would be illegal in 47 states, but luckily Citi is headquartered in South Dakota, which abolished their Usury law. Thank goodness my local legislators can't protect me from out of state predatory lenders!
(I don't maintain a balance on this card, it's a high-powered reward card that I pay off. But it pisses me off nonetheless.)
BOA has not started charging annual fees yet to my knowledge, so they haven't broken the law yet.
An annual fee would be terrible though since I am one of those scumbags who pay their cards off every month.
Where is Tyler Durden when you need him?
Did anyone else get a new Bank of America Power Rewards card out of the blue recently? I did not request one and my current card is valid for another two years, but suddenly I have a new card.
I called Bank of America and they did not have any answers. I'm trying the text chat feature now, but their only answer is to call the people I spoke with already.
Wait. Now they want me to call a different number.
I wish I could trust Bank of America more. I don't want to activate a new card that could magically have a higher rate or fees or something.
BoA is in the midst of a long running experiment to see just how dumb you people are and how much abuse you'll take before you spend an hour to move to a credit union. It's a financial Milgram experiment, and they're nowhere near done turning up the voltage.
If BOA starts charging an annual fee for my credit card (the only one I have, with a pretty low limit), I am closing that account in a heartbeat.
@robocop is bleeding: receiving a replacement card before your current card is set to expire is a tell-tale sign of a data breach. check your credit report.
thank you government. whenever the gov't tries to limit how much money a company can make, they fail. companies are a lot more creative than the gov't and they'll find a way to get what they want.
Your Tax Payer Money at Work.
Thanks Stimulus,
Thanks Obama.
Bankruptcy is there for a reason, they should have used it.
Yet another reason to never do business with BofA.
I've had a personal boycott on BofA since I was 16. I had a job back then decided to open a bank account with BofA. I was always treated very poorly whenever I had to deal with them (long story, lots of details), so I closed it and moved on.
I dislike them so much I've actually closed another bank account I had when it suddenly fell under these people due to a merger with another bank.
My husband thinks I'm silly to still avoid BofA like the plague, but stories on Consumerist about BofA always verify for me that it's still a good idea not to do business with them.
@oldtaku: I don't have BoA, but unfortunately I'm not in a position where a credit union would work for me. Credit Unions are great once you're going to live in an area for a while. Unfortunately, I'm still moving about, and need something a little more national.
@PLATTWORX: It's OK because it's a bank. Banks and most financial institutions are allowed to break the law, and it is necessary. Goldman Sachs has been doing this for decades. They are rewarded for doing so and they encourage others to do the same thing. Laws are only intended for us. Not banks.
Yeah, I'm one of the people hit with this new annual fee. I've applied for a new, fee-free card with another bank. Once that's opened I'm canceling the BoA card.
Which I guess is what they're trying to accomplish; I'm one of those "deadbeat" customers who's actually responsible and pays in full every month, and I guess they can't have that. But, you know, it's ultimately their loss. If they treated me with the respect that is allegedly supposed to come with being a customer (via mergers) for just shy of 10 years, they could've convinced me to open some bank accounts or CDs or something.
Instead I get a letter stating I'm going to be punished because I'm actually responsible with my credit. Screw 'em.
I don't see what's wrong here--the free market can police itself, and nothing predatory or drastic ever happens to consumers. Nothing to see here--move along.
@oldtaku: Agreed! The sad thing is that they already understand that once a customer, always a customer, no matter badly they are treated. Sure, a few people will leave. Most will stay. It's sad.
@JeniferF: I may be the exception to the rule. BOA always treated me great when I had accounts there, they would almost bend over backwards to help me out with various small problems. I have transferred all my balances to one of their credit cards, and am paying it off at 6% fixed interest. Their branches are not available in the state I live now, but my in laws who also live in this state have all their banking direct deposited to BOA out of state because their online bill pay rocks.
I received a new card as well, and it was due to a data breach at BofA.
But, they won't disclose anything about it except that it was a 3rd party.
@Duke_Newcombe sees what you did there...:
But -1 for misapplying the analogy.
If this were the Milgram experiment, it would be being performed on middle management at BoA.
#1 - The first rule of Fight Club is, you do not talk about Fight Club.
#2 - The second rule of Fight Club is, you DO NOT talk about Fight Club.
@craptastico: The fact that some people/companies break the law or look for loopholes in no way suggests we should do away with laws.
@Duke_Newcombe sees what you did there...: Yep and you would be suprised how fast I got my 100 million dollars after I sent $40,000 in legal fees to Nigeria.
@strife1012: Uh, the CARD act and the bailouts are not the same thing. Attempt-to-blame-everything-on-Obama fail.
@Sudonum:
Forget about any programs anyway, the fact of the matter is that Bush lost us a disgusting amount of money on pointless crap.
@PLATTWORX: I got one from citi the other day telling me that the purchase rate on my card was going up to 23.99%. Bastards.
@Duke_Newcombe sees what you did there...: you're 100% right. if people don't want to pay the fees, they go elsewhere. end of story, the world continues to turn. it is good to make people aware when banks start trying to sneak fees in rather than having to find out about them on your statement.
@strife1012: The stimulus, CARD Act, TARP, CARS, and pretty much all the other "economic responses" that have been made to the recession on Capitol Hill over the last year or so, were generally all bipartisan in nature. Blame Obama if you want -- and he should shoulder some of the blame! -- but you should also blame all the other architects of the bailouts, stimulus and "cash for clunkers," including George W. Bush, Henry Paulson, and Ben Bernanke, whose term has bridged the two administrations.
To be sure, other things like the healthcare reform are decidedly NOT bipartisan. But nearly all the above-mentioned ones, were.
@craptastico: The law is better than we have now. It is just the shakeout period is going to suck. When the dust settles we won't be able to be screwed retroactively, just going forward, and we can choose to not do business with them if we want. Just don't charge anything else with that bank and you will be OK
@craptastico: I guess I do indeed need to use the /sarcasm tag more liberally.
When banks engage in de facto collusion by simultaneously creating these new fees, there are precious few "elsewheres" to go to. Not "no alternatives"--just few.
@menty666:
Might be time to get a credit card with a credit union. I know that most in my area won't charge above 17.99%
I would close the account if not for the fact that it's one of my oldest cards and comprises a good chunk of my available credit.
How about a national usury limit? Congress can pass laws covering matters involving interstate commerce. This one would seem pretty simple and avoid a race to the bottom, South Dakota being the apparent black hole.
We just received a new B of A card (they took over MBNA operations some time ago). We haven't used it yet and if they impose any fee at all I'll simply return the card.
B of A is the V of banking.
@oldtaku: James Surowiecki spelled it out in the New Yorker - people are too lazy or it appears to be too inconvenient to switch banks, so banks won't compete on "price" (lower interest and fees).
Bank of America breaking state and federal regulations is nothing new. Many have documented how they have been doing so, openly and brazenly, in nearly every part of their business, for a year or more.
ALL of Bank of America's profit last quarter comes from *new* fees -- almost all bogus fees, many of which are probably illegal, and prey on those individuals least able to afford them. But the Fed won't do anything because this large-scale theft is the only thing keeping Bank of America from going into insolvency.
When people en mass revolt, pull their money out of BofA, and/or stop paying their credit cards, the bank will fold and then, hopefully, all of the evil people in upper management will be replaced with better people.
@oldtaku: It took me three years but I finally moved to a credit union from BOA this year! Their service is amazing. They actually respond to your emails with a real person! And in only like 10 minutes! When I went in to close my account at BOA they made me wait an hour and a half...
Great. So if they can't do annual fees then they will cancel cards on their least profitable customers to recover their costs. Win-win. Oh wait.
For an industry that makes a product that you don't have to pay a penny for, and an industry that has lost billions thanks to stupid people who can't pay their bills, they sure don't get any love.
@tankertodd: For an industry that effectively double-dips against both consumers (in the form of potential fees and interest) and merchants (interchange and other fees), they sure won't be getting any love when the industry continues to diminish the value of convenience - which I'd go as far as to say is the sole reason for both sides overlooking the painfully uneasy relationship that lies underneath.
@NeverLetMeDown: Well, many stuff that we do through the course of living our daily lives and take for granted are probably illegal through arcane laws *shrug*.
Surely some of those fees are not technically legal.
I got a letter from discover telling me they were dropping my rate.
I did not see that one coming.
Senator Dodd today proposed a financial overhaul that would limit the authority of the Fed, eliminate the Comptroller of the Currency, eliminate the Office of Thrift Supervision, and establish new agencies tasked with maintaining the US financial markets. At over 1100 pages, there's probably a bit of something in there for everyone but a Republican on Dodd's committee was not in opposition to the bill stating that it was something that could be worked with. The consumer agency tasked with protecting mortgage borrowers, etc. was part of the bill.
The immediate response from the bank lobbyists (Yingling at the American Bankers Association) was the familiar comment that regulation would make it harder for banks to do business and would limit the availability of credit. Why is it that any time banks are asked to obey the same laws other industries obey, such as fairness and disclosure, they pull out that fearmongering about limiting the availability of credit. Maybe it's time for the federal government to set up an agency that uses taxpayer funds not to bail out mismanaged banks but to provide some help for taxpayers who are having trouble making ends meet.
Banking establishments are more dangerous than standing armies....
...Thomas Jefferson
BofA seems to be breaking the law here.
That said, I received a letter from Citibank just last night telling me almost every fee on my MasterCard was being hiked from interest, to cash advance fees, to balance transfer fees. All are going up, up up. What a great way to rip off customers before CARD Act takes effect.
The government should immediately order a roll back of all fees and interest rates to what they were when CARD Act was enacted, not when it goes into effect.
I don't carry a balance nor take cash advances nor make balance transfers on my cards so these fees will have no meaning to me in real life. However. it certainly made me strongly dislike Citi for pulling something like this.