Citibank Is Closing Credit Card Accounts Without Warning Customers

(On May 22, 2009 Pres. Obama signed the Credit Card Accountability Responsibility and Disclosure Act. How effective is it?)

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(Here's what Citibank does to their good customers!! My credit card interest rate was raised by nearly 20%, from 9.9% to 28.9% - I make my payments on time!! They have $39.5B in TARP funds. The "Consumer Protection Act" does nothing to help us - only the banks!! It could happen to YOU!)





Citi starts closing Mastercards without warning

Shannon Burdette tried to pay with her Shell Mastercard after filling up her gas tank this weekend but found the card rejected.

Confused, she called the customer service line on the back of the card, issued by Citibank, and was told the account was closed because of something that appeared on her credit report. But when the Sykesville, Md., resident got a copy of her credit report online, the only negative thing she saw was "closed at credit grantor's request" on the Shell MasterCard account.

"They said there was a routine review," said Burdette, who maintained that she and her husband, Brian, used the card regularly and always paid the bill on time.

Burdette isn't alone. People across the country have been reporting similar experiences in postings on various consumer Web sites.

Citi confirmed the basics. The bank said in a statement it "decided to close a limited number of oil partner co-branded MasterCard accounts." That includes not only Shell, but Citgo, ExxonMobil and Phillips 66-Conoco cards.

The close date was Wednesday, and letters were sent out Monday to customers informing them of the change, a Citi spokesman said. The bank would not say how many cards were shut down or how much available credit they represented.

But unlike the bank's move to shut down its Home Depot cards, Citi did not discontinue the sale of these cards altogether. It is still accepting applications, promising rewards like 3 percent cash back on fuel purchases and 1 percent cash back on other spending.

No law, including the Credit CARD Act that has started to take effect, prevents banks from closing down credit accounts without warning. Credit card issuers all maintain the right, typically listed in the fine print on credit card agreements.

Citi would not say why the cards in question were shut down, issuing a statement that said only it continuously evaluates its products.

"It is kind of an extraordinary action, but these are extraordinary times," said Ben Woolsey, director of marketing and consumer research for CreditCards.com.

He noted that Citi is not the healthiest bank. In fact, Citi posted $8 billion in consumer credit losses for its third quarter last week, including both mortgages and credit cards. Like many banks with big consumer lending portfolios, Citi is expecting defaults on credit cards to rise in coming months. Credit card delinquencies typically track the unemployment rate, which is at 9.8 percent and is expected to top 10 percent soon.

Analysts noted following the earnings report that Citi has sharply reduced its outstanding credit to consumers.

A card being closed may, but does not always, damage a person's credit score.

Such scores, which lenders use to determine if you're a good credit risk, take into account a series of factors, including how long you've had credit accounts, your payment history and the balance versus available credit.

It could be that last factor that hurts consumers most, said John Ulzheimer, president of educational services for Credit.com. If a consumer had a high credit limit on the closed account, and that credit is no longer available, it could alter the "utilization ratio" for the person's remaining credit. If another type of credit carries a high balance, the loss of the credit line could push down their score.

Ulzheimer said banks have been routinely making such moves in the past year and a half, mostly on a case-by-case basis. "Every once in a while you'll get a huge pop in one particular card product," he said.

Card holders who think their cards were unfairly shut down can try to contact the bank and ask for reinstatement, but Ulzheimer didn't hold out much hope for success. "In this environment," he said, "it's not as successful as it was in the heyday of credit cards, where you could in fact call and plead your case."



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Sources: MSNBC, Red Tape Chronicles, Whitehouse.gov, Citibank, Youtube, Google Maps

FICO Credit Scoring System Is Being Revised

MSN Money News----


The New Math of FICO Scores

Even the most responsible borrowers slip up sometimes.

Maybe a utility bill went unpaid after you moved and the missed payment went into collections. Or perhaps there are unpaid library fines or parking tickets in collections that are hanging onto your credit history and affecting your FICO credit score, which is widely used.

With the newest version of the FICO credit-scoring system, however, minor delinquencies are now overlooked in calculating creditworthiness.

Under the updated scoring model, called FICO 08, small missed payments lingering in collections with original amounts of $100 or less will no longer do damage to your credit score.

Consumers also are less likely to be penalized for any single delinquency if it occurred two or more years ago -- and if their credit history is otherwise unblemished, says FICO (formerly Fair Isaac), which developed the FICO scoring system.

"There's more flexibility with missing a payment," said Careen Foster, the director of global scoring product management for FICO. "If you have a more habitual pattern of paying accounts late . . . you're more likely to get penalized for that."

If a consumer's credit usage is high, that will be more likely to hurt his or her score with FICO 08. But getting close to your credit-card limits -- even if you always pay on time -- is penalized in some way in every FICO score, not only the recent edition, Foster said.

The new system has been available at all three credit bureaus -- Experian, TransUnion and Equifax -- since last month.

The changes were made to provide lenders with a better risk assessment of borrowers, said John Ulzheimer, the president of consumer education for Credit.com, a consumer education and advocacy site. FICO decided that one small library fine didn't really predict whether a consumer was likely to default, for example.

With the changes, individuals who pose a low credit risk will probably see their scores rise a bit, and those who are high risk could see their scores drop, he adds.

FICO 08 also addresses "piggybacking," a practice used by credit-repair companies to help people improve their scores, Ulzheimer said. In piggybacking, an individual pays to become an authorized user on a stranger's account. The account holder gets paid for allowing the person to be associated with the account, and the new authorized user is able to improve his or her credit score.

"It was a practice to . . . misrepresent what your credit looks like to your bank," Foster said.

FICO 08 aims to single out individuals who are named as authorized sources through deceptive means, Ulzheimer said. Those people won't see their credit scores rise as a result. But the scores of legitimate authorized users will be treated as they always have been.

Not all lenders use the model

Borrowers shouldn't expect their credit to be graded by this new scale on every loan application. Not all lenders have adopted the new model, though more than 400 lenders are using or testing FICO 08, the company said.

In a statement, Equifax said, "Currently, many lenders and businesses are validating the new score within their systems, and adoption will vary by financial institution based on business requirements and market need."

Many credit-card companies, auto lenders, regional banks and credit unions may have already adopted FICO 08, Ulzheimer said. But for mortgages, lenders doing traditional conforming loans backed by Freddie Mac and Fannie Mae likely haven't made the move yet, he said. That's because they're waiting for Freddie and Fannie to approve its use. Freddie Mac and Fannie Mae "are essentially the lender . . . they're the ones that set the underwriting criteria," he said.

Ulzheimer said he expects Freddie and Fannie to adopt FICO 08 by the end of the year. Fannie declined to comment on FICO 08; Freddie wasn't able to provide a comment prior to publication.

Be proactive about your credit

While FICO 08 will help consumers' credit scores in some cases, people still should take steps to improve their credit. Granted, it's impossible for consumers to calculate their FICO scores themselves, said Rodney Anderson, of Rodney Anderson Lending Services in Plano, Texas.

"It's almost like the Coca-Cola formula. No one has access to the Coca-Cola formula, no one has access to the FICO formula," he said.

But by being proactive, you can start to work toward a higher score, something that will serve you well every time you apply for a loan.

Some suggestions:

* Monitor your credit reports and correct errors. Don't just look for negative events on your record; also examine your credit limits to make sure they're accurate. Credit limits that appear lower on the report than they actually are have the potential to hurt your score, Anderson said.

* Pay bills on time and keep card balances low. Your payment history, and the amount you owe on your accounts as a ratio of the amount of credit you have access to, are important components of your score, Foster said. FICO 08 is more sensitive to high credit usage, and consumers may see a lower score if their reported balance on one or more cards is near the account's limit.

* Take on new credit only when you need it. Some credit cards come with great offers, including a percentage off your bill if you sign up at the cash register. If you accept, make sure you're getting a big enough benefit to make it worthwhile -- taking on additional credit could end up dinging your score, Foster said.


Sources: MSN Money Central, Huffington Post

President Obama Signs Credit Card Accountability, Responsibility and Disclosure Act of 2009

This afternoon once again President Barack Obama made history by using the "rule of law".

To ease the strain of financial burdens many American citizens have recently experienced as a result of greedy lenders and negative Wall Street trends, he signed the Credit Card Accountability, Responsibility and Disclosure Act of 2009.

As new restraints are being placed upon Financial Institutions disallowing them to crush the pockets of foolish or naive consumers, credit card agreements with a financial death wish attached will finally become extinct.

Going forward only Credit Card companies which prove to protect consumers not ruin them, will continue to exist in the world of Free Market Enterprise.

President Obama also praised Senator Dodd (D-CT) for his hard work in helping to draft this extremely important bill.

The Credit Card Accountability, Responsibility and Disclosure Act is effective approximately February 2010.

Thank you sir.

(President Obama's remarks made during today's press conference:)

"With this bill, we're putting in place some common-sense reforms designed to protect consumers like Janet."

"I want to be clear about this: Credit card companies provide a valuable service; we don't begrudge them turning a profit. We just want to make sure that they do so while upholding basic standards of fairness, transparency, and accountability. Just as we demand credit card users to act responsibly, we demand that credit card companies act responsibly, too. And that's not too much to ask."

"And that's why, because of this new law, statements will be required to tell credit card holders how long it will take to pay off a balance and what it will cost in interest if they only make the minimum monthly payments. We also put a stop to retroactive rate hikes that appear on a bill suddenly with no rhyme or reason."

"Every card company will have to post its credit card agreements online, and we'll monitor those agreements to see if new protections are needed. Consumers will have more time to understand their statements as well: Companies will have to mail them 21 days before payment is due, not 14. And this law ends the practice of shifting payment dates. This always used to bug me -- when you'd get like -- suddenly it was due on the 19Th when it had been the 31st."

"Lastly, among many other provisions, there will be no more sudden charges -- changes to terms and conditions. We require at least 45 days notice if the credit card company is going to change terms and conditions."

"So we're not going to give people a free pass; we expect consumers to live within their means and pay what they owe. But we also expect financial institutions to act with the same sense of responsibility that the American people aspire to in their own lives."

"And this is a difficult time for our country, born in many ways of our collective failure to live up to our obligations -- to ourselves and to one another. And the fact is, it took a long time to dig ourselves into this economic hole; it's going to take some time to dig ourselves out."

"But I'm heartened by what I'm seeing: by the willingness of old adversaries to seek out new partnerships; by the progress we've made these past months to address many of our toughest challenges. And I'm confident that as a nation we will learn the lessons of our recent past and that we will elevate again those values at the heart of our success as a people: hard work over the easy buck, responsibility over recklessness, and, yes, moderation over extravagance."


The principles of sweeping reforms included in this legislation are:

* First, there have to be strong and reliable protections for consumers.

* Second, all the forms and statements that credit card companies send out have to have plain language that is in plain sight.

* Third, we have to make sure that people can shop for a credit card that meets their needs without fear of being taken advantage of.

* Finally, we need more accountability in the system, so that we can hold those responsible who do engage in deceptive practices that hurt families and consumers.

The Key Elements of this legislation will include:

Bans Unfair Rate Increases: Financial institutions will no longer raise rates unfairly, and consumers will have confidence that the interest rates on their existing balances will not be hiked.

* Bans Retroactive Rate Increases: Bans rate increases on existing balances due to "any time, any reason" or "universal default" and severely restricts retroactive rate increases due to late payment.

* First Year Protection: Contract terms must be clearly spelled out and stable for the entirety of the first year. Firms may continue to offer promotional rates with new accounts or during the life of an account, but these rates must be clearly disclosed and last at least 6 months.

Bans Unfair Fee Traps:

* Ends Late Fee Traps: Institutions will have to give card holders a reasonable time to pay the monthly bill – at least 21 calendar days from time of mailing. The act also ends late fee traps such as weekend deadlines, due dates that change each month, and deadlines that fall in the middle of the day.

* Enforces Fair Interest Calculation: Credit card companies will be required to apply excess payments to the highest interest balance first, as consumers expect them to do. The act also ends the confusing and unfair practice by which issuers use the balance in a previous month to calculate interest charges on the current month, so called "double-cycle" billing.

* Requires Opt-In to Over-Limit Fees: Consumers will find it easier to avoid over-limit fees because institutions will have to obtain a consumer’s permission to process transactions that would place the account over the limit.

* Restrains Unfair Sub-Prime Fees: Fees on sub prime, low-limit credit cards will be substantially restricted.

* Limits Fees on Gift and Stored Value Cards: The act enhances disclosure on fees for gift and stored value cards and restricts inactivity fees unless the card has been inactive for at least 12 months.

Plain Sight /Plain Language Disclosures: Credit card contract terms will be disclosed in language that consumers can see and understand so they can avoid unnecessary costs and manage their finances.

* Plain Language in Plain Sight: Creditors will give consumers clear disclosures of account terms before consumers open an account, and clear statements of the activity on consumers’ accounts afterwards.

For example, pre-opening disclosures will highlight fees consumers may be charged and periodic statements will conspicuously display fees they have paid in the current month and the year to date as well as the reasons for those fees.

These disclosures will help consumers make informed choices about using the right financial products and managing their own financial needs. Model disclosures will be updated regularly based on reviews of the market, empirical research, and testing with consumers to ensure that disclosures remain clear, useful, and relevant.

* Real Information about the Financial Consequences of Decisions: Issuers will be required to show the consequences to consumers of their credit decisions.

o Issuers will need to display on periodic statements how long it would take to pay off the existing balance – and the total interest cost – if the consumer paid only the minimum due.

o Issuers will also have to display the payment amount and total interest cost to pay off the existing balance in 36 months.

Accountability: The act will help ensure accountability from both credit card issuers and regulators who are responsible for preventing unfair practices and enforcing protections.

* Public posting of credit card contracts: Today credit card contracts are usually available only in hard copy and not in plain language. Now issuers will be required to make contracts available on the Internet in a usable format. Regulators and consumer advocates will be better able to monitor changes in credit card terms and evaluate whether current disclosures and protections are adequate.

* Holds regulators accountable to enforce the law: Regulators will be required to report annually to the Congress on their enforcement of credit card protections
* Holds regulators accountable to keep protections current:

o Regulators will be required to request public input on trends in the credit card market and potential consumer protection issues on a biennial basis to determine what new regulations or disclosures might be needed.

o Regulators will be required either to update the applicable rules, or to publish findings if they deem further regulation unnecessary.

* Increases penalties: Card issuers that violate these new restrictions will face significantly higher penalties than under current law, which should make violations less likely in the first place.

Cleans Up Credit Card Practices For Young People at Universities. The act contains new protections for college students and young adults, including a requirement that card issuers and universities disclose agreements with respect to the marketing or distribution of credit cards to students.

(President Obama signs sweeping Credit Card reform bill into law.)



Sources: Whitehouse.gov, Washington Post, MSNBC, Day Life, Reuters, Youtube