Democratic Senator Chris Dodd recently expressed his concerns regarding the apparent practice of credit card companies raising interest rates prior to the full enactment of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act.
In a letter addressed to the both the Federal Reserve chairman and a number of high-ranking members of regulatory agencies, the senator from Connecticut encouraged the enforcement of a provision in the act which would require the review of credit card accounts whose interest rates have been increased since Jan. 1 of this year.
Dodd said that under the act interest rate increases are subject to a six-month review.
"I ask you to immediately notify all credit card companies under your respective jurisdictions that they will be held accountable for all interest rate increases during this time period and will be subject to the review requirement once it takes effect," Dodd said in his letter.
If the review process determines that a credit card holder’s risk has been reduced, or if the circumstances of the rate increase have changed, card companies are supposed to reduce the rate.
Doing so may help consumers when it comes to their credit score. As interest rates are reduced, people will be able to pay off more of their credit card debt in a shorter amount of time, which could raise their credit scores.
The Credit CARD Act was signed into law this past May, with some of its provisions taking effect at the end of this August. The act takes full effect in February of 2010.