Credit Card Report
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SAN FRANCISCO — Faced with mounting account delinquencies, major U.S. banks are penalizing credit-card customers late on payments by hiking their accounts to maximum default interest rates of 30% and more — even those with good credit records.

Default rates imposed for late payments, exceeding credit limits and bounced payment checks typically are levied on cardholders with poor credit scores, often incrementally. But state banking regulators and watchdog groups report a growing number of complaints of maximum default rates being imposed on erring customers with above-average credit scores of 700 and higher.

See Also: Has your credit card interest rate been raised?

The tighter rein on credit-card debtors comes amid heightened scrutiny in Congress of suspect industry practices. Lawmakers fear wary lenders will resort in the months ahead to “hair-trigger repricing” of interest rates on cardholder’s existing balances at the least provocation.

“We find it totally unfair that if you’re one day late, you get hit with a 30%-plus interest rate,” said Linda Sherry, director of national priorities for Consumer Action. “There’s been a pervasive attitude of hands-off the industry because we don’t want to tinker with the marketplace, but some of its practices are just patently wrong.”

“Some issuers are pointing to the hits they’ve taken from the subprime mortgage fallout as a reason Congress shouldn’t regulate the credit-card industry,” said U.S. Rep. Carolyn Maloney, D-N.Y., chair of the House Subcommittee on Financial Institutions and Consumer Credit. But “the hands-off approach prior Congresses have taken to this industry has spawned unfair practices that hurt consumers, including hair-trigger repricing.”
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Today’s punitive default rates of 30% and more owe to the absence of usury ceilings in Delaware and South Dakota, which eliminated them during the 1981-82 recession to attract major banks’ credit-card operations. Those states’ subsequent big job gains came at the loss of interest-rate protections for cardholders nationwide.

States cannot impose their own rate ceilings because of a 1978 U.S. Supreme Court ruling that permitted banks to “export” uncapped credit-card interest rates in their headquarter state to customers throughout the nation.
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- Source: Chris Pummer, Credit Cards Sock Late Payers With Default Rates Of 30% Or More, MarketWatch, via FOX News, Jan. 1, 2008 — Summarized by Credit Card Report