Wells Fargo, the eighth-largest US card issuer, is to raise
interest rates for a majority of its credit cardholders, a decision
that will come into effect on the eve of the implementation of a
new law limiting such hikes.


The San Francisco-based bank said that the interest rate rise
will be approximately 3 percentage points and will affect most of
its credit card portfolio. The raise comes into effect on 30
November, a day before House Financial Services Committee chairman
Barney Frank wants curbs on rates and fees to become effective
under the new credit card laws law passed earlier this year. The
bank is also eliminating over-limit fees, which are charges that
are imposed when customers exceed their credit lines.

The CARD Act comes into law in February 2010 and includes several
provisions aimed at limiting how credit card companies can charge
customers, and includes making sure that card payments are applied
to the debt with the highest interest rate first (after minimum

Most card companies currently require cardholders to pay off lowest
interest rate balances first. The CARD Act also attempts to
prohibit card companies from arbitrarily changing the terms of
their contract with a cardholder, banning the so-called practice of
‘any-time, any-reason re-pricing’, which is the current disputed
issue with Wells Fargo.

The first sections of the law, which is being implemented in
phases, went into effect on 22 August. These include provisions
where credit card companies are required to send out a notice to
consumers of any changes in the interest rates or other terms and
conditions of the credit card agreement a minimum of 45 days before
the change becomes effective.

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Also, credit card companies must mail credit card statements to
consumers a minimum of 21 days before the payment is due and cannot
make payments due on different days of the month, on weekends or
during the middle of the day.

The change will not affect all Wells Fargo customers, specifically
those who joined in the last year, and those who were passed over
during the bank’s acquisition of Wachovia will be exempt from the

Wells Fargo also recently said its chairman Dick Kovacevich is
stepping down to be replaced by CEO John Stumpf. Kovacevich had
agreed last November to continue as chairman for an interim period
to focus primarily on issues related to the challenges facing the
financial services industry and to the Wells Fargo-Wachovia merger
integration. Wells Fargo’s board of directors confirmed that
president and CEO Stumpf will assume added responsibility as
chairman on 1 January 2010.

Bank of America bucks the trend

Conversely, Bank of America has stated that it is to go in the
opposite direction of issuers who are hiking up fees before new
laws come into effect.

Bank of America is putting a moratorium on all interest rate rises
between now and February 2010. The move has been lauded by
lawmakers who have requested that other banks follow Bank of
America’s example.

Senate Banking Committee chairman Chris Dodd said: “Every other
credit card company should follow suit. This Congress has made it
clear that abusive credit card practices are no longer

Both announcements come less than two weeks after Congress members
Carolyn Maloney of New York and chairman Frank introduced a bill to
fast-track the new CARD Act to stop exactly the type of increase
Wells Fargo have instituted. The proposed bill would move the
effective date of the majority of consumer protections in the act
up to 1 December 2009.

Rival issuers JPMorgan Chase and Discover had already raised rates
back in May, as soon as the announcement about the CARD Act came
out, although JPMorgan Chase has fuelled speculation about the fate
of its credit card portfolios by selling $2.53 billion of credit
card-backed bonds in September