Companies are implementing rate hikes and extra fees to curb higher defaults and lower consumer spending.
The new rules come on the heels of a $700 billion federal bailout of the financial system, including $125 billion invested in the nine largest U.S. banks. Recent moves by JPMorgan Chase & Co., Citigroup Inc. and other firms to add charges and decrease the amount of money cardholders can borrow at the same time they’re taking taxpayer dollars have angered some customers.
“People are totally confused,” said Mark Zandi, chief economist at Moody’s Corp.’s Economy.com. “The taxpayer is essentially a big owner in JPMorgan, Bank of America and Citigroup, and these are the folks who make credit-card loans. Many are asking, ‘So why is it that my credit-card loan got pulled? Why am I being charged a higher rate?’”
A decline in spending by consumers and a rising number of defaults are leading Citigroup, JPMorgan and other lenders to increase fees and interest rates for some customers and cut the amount others can borrow. The changes are intended to reduce risk and raise revenue.
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