Today at 9:30 a.m., Senator Carl Levin (D-MI) will continue his investigation into the unfair and deceptive practices of the credit card industry. Today's topic: arbitrary rate increases for cardholders in good standing. The hearing picks up where Senator Levin left off in March, when he questioned the use of excessive fees, interest charges, and the abuse of grace periods.

Today's hearing will feature two panels. First, three aggrieved consumers will share their horror stories. Then, the presidents of Discover, Bank of America, and Capitol One will explain that the three consumers who just testified are not at all representative of average cardholders. Right.

The tears and lies start flowing at 9:30 a.m.
(Photo: samwilkinson)

9:25: Two choices for your viewing and listening pleasure: Video Link—Audio Link
9:34: And we're off. Levin has arranged for an interesting hearing. The first consumer we will hear from is Janet Hard. Janet is married to a steamfitter. She has a Discover card that jumped from 18% to 24% because her FICO score dropped. When Janet complained, the rate dropped to 21%. Discover's President will testify today.

9:37: Levin is most incensed by the retroactive nature of rate increases. Take a consumer whose debt jumps from 15% to 27%. That new rate applies not to new debts, but to all incurred debts.

9:41: Bonnie Rushing has two Bank of America cards. One is associated with AAA. Both cards had an 8% rate. BoA bumped the AAA rate from 8% to 23% because Bonnie's FICO score fell. It didn't matter that her payment history was perfect. Bonnie isn't sure why her FICO score dropped, but she thinks it may be because she opened a store-branded card at Macy's to receive an immediate 10% discount on a purchase, unaware that it would affect her FICO score.

9:43: When Bonnie received the rate-increase notice, she opted-out and closed her account. BoA tried to pressure her to keep the new, higher rate, but after she complained to state and federal authorities, BoA let her close her account. BoA's president will testify today.

9:44: Capital One raises rates by looking for accounts that haven't been bumped in three years—but they don't use FICO scores.

9:44: One consumer was hit by three rate increases in three months. Oftentimes the rates doubled or tripled. The consumer was able to reduce her rates by calling and fighting the credit card companies.

9:46: Levin: "If you shop with a credit card, as most consumers do, dangers lurk."

9:46: Most people don't realize that their FICO score drops even if they approach—not exceed, approach—their credit limit.

9:47: The Committee asked who determines a FICO score, who determines when a rate jumps because of a FICO score. The answer: computers.

9:47: Issuers don't know why a FICO score drops. They have four "reason codes," generic statements like: "balance grew too fast compared to credit limit," or "balance on bank cards is too low."

9:48: By law, consumers are entitled to know who supplies credit data. Even with this data, few consumers realize that a rate hike was caused by a lower FICO score.

9:50: When Janet Hard received her rate increase notice, she was told that it was because her balances were too high and her accounts were delinquent. When pressed, Discover couldn't explain which balances were too high, or which accounts were delinquent.

9:51: Levin does not want any increases for consumers who pay their bills on time. At least not retroactive increases.

9:53: Credit card companies have drop rates when the Subcommittee calls to inquire about an account.

9:55: Levin's solution is S. 1395, which would:"bar companies from charging interest on debt paid by the due date, cap penalty interest-rate increases, prohibit interest from being charged on late fees or over-the-limit fees and prohibit late fees if a card-issuer delays crediting a payment."9:55: Senator Norm Coleman (R-MN) is claiming that the nature has credit has changed. It used to be something you earned. Now, creditors are tossing cards like confetti.

9:56: It seems like a personal problem, but it has nationwide implications.

9:57: For background: Abusive credit card practices affect everyone. In a country of 300 million, we charged more than $1.8 trillion dollars on over 691 million credit cards in 2005. Back in the eighties, Americans charged about $70 billion per year.

9:57: Coleman argues that the democratization of credit has helped America, but it has been tainted by federal regulations that raise rates. Eh? Coleman asked credit card companies to regulate themselves so Congress can focus on something else. Apparently, his strategy of "Be Nice, Please" is working. Double-cycle billing is now a thing of the past. See, no federal regulation needed. "These are serious steps and constitute self-reform."

9:59: 'There is a competitive advantage to offering fair user-friendly offers.' Sure, but nobody does. At least he realizes that there still massive problems, with universal default and rate increases out of the blue.

10:00: Claire McCaskill (D-MO) argues that even lawyers can't understand credit card offers.

10:01: Creditors hate closing accounts. You can't call, or write on a bill that you want your account closed. You have to write a separate letter.

10:02: Senator McCaskill's mother wrote in that she wanted to cancel her credit card. That didn't stop them from sending her checks for the holiday season that would re-activate the card.

10:03: Excellent: McCaskill is calling credit card debt "The Next Subprime Disaster TM." She is absolutely right.

10:04: If the credit card companies won't stop financially raping Americans, McCaskill wants to break out some serious regulation.

10:04: Senator Tom Coburn (R-OK) has no opening statement.

10:05: Interesting: Levin is swearing in the witnesses. Most testimony is not sworn—there is simply no need. Lying to Congress is a felony that carries up to five years in jail.

10:06: Here is Janet Hard, the consumer with the Discover cards.

10:06: Janet is a registered nurse turned stay-at-home Mom.

10:07: She used credit cards to make ends meet, which is always a losing strategy. She figured that she could make boost her income when she went back to work when she stopped taking care of her kids.

10:07: She learned about the rate increases only after she realized that her payments were no longer reducing her debt at the usual clip.

10:08: Janet was initially told that the rate was increased because of a spot credit check. When she called to complain, Discover agreed that she was an excellent customer, but refused to drop the rates.

10:08: She also has an HSBC account, which accesses the same credit data. HSBC did not raise her rates.

10:09: She does not want to shirk her debts. She wants to be treated fairly. "We feel as though we've been robbed."

10:10: Onto Bonnie Rushing. Downsizing cost her a job and income security, but she never missed a credit card payment.

10:11: Still, the rate on her BoA AAA card unexpectedly tripled. Bank of America said that she had been sent a change in terms notice without responding, and so her rate was bumped. Bonnie could no longer refuse the rate or close the account.

10:13: Bonnie tries escalating to a supervisor, who offered to renegotiate the rate down from 23% to 21%, still much higher than the 7.9% Bonnie had enjoyed.

10:14: AAA intervened and was able to press BoA into accepting the original, fixed rate of 7.9%

10:15: A bank executive told Bonnie that the change was made because she was a "good long-standing customer whose business they did not want to lose."

10:15: Bonnie took her experiences with the call center very seriously. More than anything, she's