Citigroup Chief Says He Would Back Interest Rate Cap

Vikram PanditCitigroup Chief Executive Vikram Pandit said he would back a limit on credit card interest rates if lawmakers imposed such a cap, as many in Congress have proposed ahead of reform laws.
Senate Republicans, however, have blocked a proposal by Senate Banking Committee Chairman Chris Dodd, D-Connecticut, that would prevent card issuers from hiking rates and fees one existing balances until the industry reforms take full hold in February.
Republicans put the bill, co-sponsored by Dodd, on hold, a procedural step that makes it virtually impossible for it to pass. With healthcare reform taking up much of the Senate’s time until Christmas, its consideration is highly unlikely. The move also puts into further doubt that the Senate will take up a measure to immediately begin enforcing the Credit CARD Act of 2009. Such a bill already passed the House. 
Hours before the Senate’s move against the issue, Pandit said in an interview with the Boston Globe that he would support a rate freeze, but only if it was applied fairly across the industry, and only on new accounts.
He cautioned, however, that any rate cap would lead to a renewed reduction in the credit flow to consumers, which would set back the economy even further. He also told the Globe that such a move would be partially positive in reigning in the careless lending that push many card holders into debt.
“Whatever it is you put out there is going to impact the amount of credit creation in the U.S.economy, and it’s going to impact who’s going to get cards. Very simple,” Pandit told the Globe. But, “I don’t disagree with the notion that having high rates in this environment is not conducive to driving economic recovery.”
Citigroup and other top card issuers have been raising rates, up to 30 percent, reducing or eliminating available credit or outright cancelling accounts – event on credit-worthy customers. They are doing this ahead of the reform laws, signed into law in May, that are scheduled to take full effect in February.
Lawmakers are trying to make that date effective immediately, or seeking to freeze rates. But the Senate has yet to take up the measure, and there seems to be a reluctance from the White House of rushing into a card rate freeze that might hurt economic recovery efforts.
Pandit also told the Boston paper that Citi adopted a 10 percent rate on its cards three years ago, expecting competitors to follow the bank’s lead. But Citi’s rivals did not follow. The result was that many Citi customers paid off higher-rate cards with the low Citi rates, and then started to default on their Citi card balances.
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2 thoughts on “Citigroup Chief Says He Would Back Interest Rate Cap

  • November 19, 2009 at 12:45 pm

    How the heck can this guy say this with a straight face after many of us long term, on-time paying, high credit quality customers just got a note that they are jacking up our rates for a second time in the past year to 20-30%?? So those of us who pay our bills are getting squeezed by these loan sharks so they can pay us back our own money as law-abiding tax payers yet they have enough money to give some top executives 50-100% pay raises??
    Citi is the one that picked who to lend to – not me. Citi is the one who sent did all kinds of advertisements begging people to spend money to get rewards and not to worry because of their low interest rate. Citi is the one who begged me (and continues to do so) at least 3x a month to transfer my balances to them at a lower interest rate. So why is it that I have to pay for their mistake?? Oh yeah – because I’m a person who actually pays my bill so they know I’d still honor my commitment to pay for what I borrowed. How can they do this when the rate that banks get to borrow at from the Fed is near 0%???
    Don’t they know they are screwing their bottom line (and eventually my pocket book yet again) even further by putting more and more people in a position that they will fall behind and will just give up and write the whole debt off by filing bankruptcy?? Don’t they know they also now have people like me who will not use their card anymore for them to get the transaction fees that those purchases generate?? They are cutting off their nose to spite their face.
    The governmenet failed us by giving the banks so much time to screw us instead of putting in an immediate cap on how much they could raise our rates while the banks prepare for the new rules. Shame on Citi and the other banks that are taking advantage of this warning. And shame on me for letting this mess affect me in the first place. Never again. Never, ever again.

  • November 20, 2009 at 10:44 am

    I had my rates raised on both of my Citi cards, and had one converted from a fixed rate to a variable rate for no reason. I opted out from the new terms of agreement and my accounts will both close on the card expiration dates.
    Citi is driving away customers and destroying their brand name with this move. I’ll never use any of their financial services again.

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