Wednesday, September 9, 2009
or Forcing Them to Accept Higher Interest Rates
SAN FRANCISCO, CA — Consumers Union, National Consumer Law Center, and USPIRG called on Chase bank to stop hiking minimum payments on credit card customers with fixed interest rates in response to numerous complaints from consumers about the practice. Over the past year, Chase has been notifying many of its customers that their minimum payments would increase from 2% to 5% of their balance. Customers can keep their minimum payment at 2% only if they agree to forgo the low promotional interest rate they signed up for and accept a doubled interest rate.
In their letter to Chase, the groups note: “While over the long term higher minimum payments can reduce debt faster, the sharp rise in minimum payments can throw a family budget into disarray, especially during a recession. The real effect of these sharp increases in minimum payments is to force customers who can’t face a more then doubled minimum payment to give up their favorable fixed promotional rate. This sharp increase will also force many consumers to default into penalty interest rates which will keep them indebted for longer.”
A complete copy of the consumer group letter to Chase is found below:
September 8, 2009
Gordon A. Smith
CEO Card Services
J.P. Morgan Chase & Co.
270 Park Avenue
New York, NY 10017
Re: Minimum payment increases
Dear Mr. Smith:
During the last twelve months Chase bank has twice notified many of its customers that their minimum payments would increase from 2% to 5% of their balance. Consumers Union has received complaints from more than 100 of these Chase customers, all of whom describe the following similar set of facts:
The consumers were not late in making payments.
Chase’s change in repayment terms raised credit card payments to 250% of the old payment. While over the long term higher minimum payments can reduce debt faster, the sharp rise in minimum payments can throw a family budget into disarray, especially during a recession. The real effect of these sharp increases in minimum payments is to force customers who can’t face a more than doubled minimum payment to give up their favorable fixed promotional rate. This sharp increase will also force many consumers to default into penalty interest rates which will keep them indebted for longer.
Here are just two Chase customers who have shared with Consumers Union the impact this increase has had on their financial situations:
Tom from California told Consumers Union about his experience with Chase. He reports that he has been using his two Chase credit cards to help support his small business. He acquired the second card when Chase was offering a promotional balance transfer. As a consumer with a perfect credit record, he was shocked to receive a notice indicating his minimum payment on his balance transfer was increasing from 2% to 5% starting September 2009. His monthly payments will now go from $475 to $1200. As a self employed small business owner, he is having a hard time thinking about how he will pay more than twice as much to Chase each month and still turn over a profit to keep his business going.
Earl from Maryland told Consumers Union that he took advantage of a promotional balance transfer offered by Chase bank to help pay for his daughter’s college tuition. With a lower interest rate and 2% minimum payment requirement, it seemed to him to be a valid financial decision. Then Chase upped Earl’s minimum payment to 5% of the balance. Carrying a $50,000 balance from tuition costs, Earl says he won’t be able to pay off the balance at that rate and will most likely default.
We ask Chase for the following:
By changing the terms of these promotional financial products Chase is significantly harming the economic stability of the families who make up its consumer base. We ask that Chase reconsider this devastating change in terms.
Sincerely,
Consumers Union
National Consumer Law Center
USPIRG
Gail Hillebrand or Michael McCauley – 415-431-6747