Citi Announces Industry Leading Changes to its Credit Card Practices To End "Universal Default" and "Any Time For Any Reason" Changes. As part of its commitment to lead the industry in putting its clients first with excellent service and business practices, Citi today announced it was making two significant changes in its Citi-branded credit card business. Citi is eliminating the industry practice of increasing interest rates for individual cardholders due to their defaults on financial commitments with other parties, sometimes known as "universal default". Until now, Citi has given customers the right to opt out of any such increase. But with this announcement, Citi is going even further, abandoning the practice altogether for all customers. Citi is also eliminating "any time for any reason" increases to the rates and fees of its customers' accounts. Traditionally, credit card issuers have taken the position that they can increase the rates and fees of a cardholder's account at any time for any reason; for example, to respond to general conditions in the financial markets. As a result of the new policy, Citi will not voluntarily increase the rates and fees of the account until the card expires and a new card is issued (typically two years). Now, the only reason the rates and fees will increase before the card expires is if a customer pays Citi late, exceeds the credit limit or pays with a check that bounces. Anybody else got any good jokes??? After all, those last 3 reasons Citi will still increase a cardholder's rates is what causes most people the most problems. The only real break they are giving is not increasing because you have problems with other cards or bills.
I guess you'd have to look at it from a business stand point of view, if you lend someone money and they either don't pay it back on time or bounce a check to you then I think that you are pretty much of a "risk" to lend to and deserve a higher interest rate than those with no late payments or bounced checks. JMHO
That's logical enough but if they bounce a check then they are often not in good financial shape Might be wiser to simply freeze the account until it is paid down to a zero balance. Being late can happen for many reasons besides being cash strapped. If they are cash strapped then why load more on their backs? Those things might be good cause to freeze the account for a while but not to add more interest. That's the way I see it.
A couple years ago I received a similar notice from BofA. They would be in a position to independently determine the reliability of using such information, based on data they could easily collect. We already know that some lenders (Cap One, for example) use incomplete reporting of credit information such as credit limits to defend against competitors who might attempt to steal "their" customers. Since we can assume that CC lenders have an interest in both avoiding risk, and in making income from fees, this implies that Citi does not consider credit report information on defaults and lates from other creditors as fully reliable indicators of risk worth cutting off business. It may also reflect the level of reliability of credit report information in general, including collection of old accounts which might be re-aged. In fact, if you think about it, an unscupulous competitor could use this avenue to snatch Citi's best customers even at higher uncompetitive terms, merely by posting erroneous lates and sending a BT offer. In a month or two, once you get the new accounts or BT, on a consumer that you already know is not really a risk ("inside information": you pulled PRMs or AR reports before your "erroneous" posting), you just remove the error. Since the consumer probably will take longer than that to even realize there is a problem and dispute it, in most cases there would be no clue what had happened, or at most you would already have corrected what the consumer might dispute, so there is not even any liability.
Anyone intending to work with statistical data must recognize that some data is simply erroneous, i.e. "outliers" more indicative of an error in measurement or recording than useful in estimating a trend. Unlike unbiased but "noisy" data, averaging outliers does not result in any improvement in estimating the mean.
