Bank of America (NYSE:BAC) sent a letter to one of its harshest critics, Senator Christopher Dodd, head of the Senate Banking Committee, saying that it will not raise the rates that it charges on credit cards between now and February when a new law restricting rate and fee increases on cards takes effect.
The bank wrote, “In light of the concerns expressed to us by our customers, Bank of America will not implement any change in terms (risk or economic based) re-pricing of consumer credit card accounts between now and the effective date of the CARD Act.”
Dodd will likely use the move by B of A to twist the arms of other credit card issuer to follow suit.
Bank of America is probably not making the move out of generosity.
The government obviously “owns” a significant part of B of A due to its investment of TARP funds. The bank’s board is now largely made up of individuals who were picked with the help of the Administration to oversee the troubled firm’s business practices and balance sheet.
Interest rates charged to consumers and businesses have become a bone of contention between the banking industry and the government just as banker compensation has become. The Administration and many members of Congress believe that financial firms owe taxpayers better access to capital in exchange for the role that the government played in salvaging the credit markets.
In the tug of war over interests between the banks and the government, Uncle Sam is winning.
Douglas A. McIntyre
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