Bank of America's Infamous Rate Increase...

Or A Corporation's Primer on How to Lose a Customer

After accepting a reported total of $50.2 billion in tax payer funded bailout monies [1], Bank of America has found a very creative way of returning the favor to those tax payers who also happen to be customers of the company: increasing rates to levels usually associated with punitive measures for delinquent or "high risk" credit accounts. Given the current economic situation, where one of the most advocated ways forward is to increase spending, BoA has instead made credit card purchases more costly for their customers. While before the rate increase, a customer may have used the card as a legitimate way of financing large ticket items, now a card holder may show restraint and think, "can I really afford to finance this purchase at 18.99% ?" Probably not. In this blogger's opinion, while the rate increase may be legal and within the contractual bounds of the card holder agreement, it demonstrates a clear lack of corporate ethical conscience and disregards the needs of a nation.

After four years of faithfully adhering to my credit card agreement with BoA, I have become a victim in the latest round of BoA credit card rate increases. Four years of on-time payments, staying within my credit limit, and even maintaining a balance on the card and, poof, my amazing rate disappears.

In 2005, I applied for the BoA Visa Signature card. My application was accepted and, because of my diligent protection of my credit history and score, I was awarded with a fixed rate of 7.99% APR across purchases, balance transfers, cash advances, etc. An excellent credit card for someone right out of college.

For four years, I used this credit card for one thing. Helping pay off my student loans. The interest rates on my student loans were higher than the BoA card. I used the initial 0% balance transfer APR on the card and started transferring balances from my student loan lender to the card. I continued this practice even after the card's introductory 0% balance transfer APR went away because the interest rate at 7.99% was still better than what my student loan lender could offer. I used the card for auto and renter's insurance payments and other large ticket items. I carried balances on the card, generating interest ("profit") for BoA. Never missed a payment, never exceeded my limit.

Below are scans of the letter I received from BoA on 6 April 2009 where I was simply informed, "We are increasing Annual Percentage Rate(s) (APRs) on your account for Balance Transfers, Cash Advances and Purchases and changing your APRs to use a variable rate formula." Slap. In. The. Face.


Here is a line worth mentioning, "We are making this change to your Annual Percentage Rates due to a change in our business practices, and due to the pattern of payments and Annual Percentage Rates on the account." To me, that translates to: We're screwing you because we can, and because you make timely payments above the minimum required and your APR has been too low for too long. Why would you even include this vague line in a mailer. As a customer, if your business practices increase my APR I'd rather you didn't make those changes.



I first called the 877 number listed on the mailer and was presented with only the option of rejecting the increase. I was able to transfer to Customer service where I was on kept on hold for 12 minutes and my call was terminated without speaking to anyone. I called back using the customer service number on the back of my card and was kept on hold for another 10 minutes. I was finally able to speak to customer service representative "Alex." I asked for an explanation of why my rate was being increased and was told:


  • Credit Card companies actually have to pay merchants

  • Increase in intra bank lending rates

  • Economic conditions are hard on everyone, including large corporations like BoA

I reviewed my options with "Alex" who confirmed that I can accept or reject the rate increase. Accepting the rate increase would move my APR up to 12.99% variable and affect my existing balance. Rejecting the increase would keep my APR at 7.99% fixed for my current balance; however, if I ever used the card again my APR would immediately jump to the 12.99% variable or whatever the interest rate was when it jumped. Essentially, I was being held hostage. On one hand, I grin and bear it. On the other hand, I effectively lose a credit card. Sure, I can keep it open after paying off the balance but I can never use it again or my rate increases. So what's the point? The card will be closed. A credit card with a long history that, in closing, will affect my credit history and score. Awesome. Because I chose to enter into a relationship with a company that likes to screw its customer base, I get doubly screwed in the end.

I wrapped up my conversation with Alex, who really did a fantastic job (honest, no sarcasm here) and asked to be escalated to the second tier. A supervisor by the name of Vanessa answered the phone. I began the conversation with her by complimenting Alex's professionalism on the phone. I went through the exact same conversation with her; however, when we finished reviewing my "options" I issued the threat. "Vanessa, I feel very slighted as a customer. Slighted enough to walk away from BoA. Withdrawing my checking account funds, closing my investment accounts. Transferring everything to another account. Is there anything you can do to stop this? " "No, sir. There is no flexibility with the rate increase."

No "I'm sorry you feel that way."
No "Sir, we can certainly work with you to keep a customer." Nothing.

Below are my notes from the phone call with Alex and Vanessa.

I sat on all of this for a few days, figuring out what my next move.

First, I wrote a letter to Kenneth Lewis, the current CEO of BoA. A copy of the letter can be found below with appropriate information redacted:

-----------------------------------------------------
Mr. Kenneth D. Lewis
100 N. Tryon Street.
Mail Code NC-1-007-18-01
Charlotte, NC 28255

Dear Mr. Lewis,

I am writing you about a recent action imposed upon me by Bank of America (BoA). On 6 April 2009, I received a mailer from BoA detailing a rate increase affecting my BoA Visa Signature Card. The letter provided no more explanation than, "We are increasing Annual Percentage Rate(s) (APRs) on your account for Balance Transfers, Cash Advances and Purchases and changing your APRs to use a variable rate formula." When I applied for this card in 2005, I was given a fixed rate APR of 7.99% across all purchasing options - an excellent card and rate. Due to the amazing rate, I used the card extensively, carrying balances and generating interest ("profit") for your organization. In four years, an excellent customer relationship had been developed between BoA and myself. In fact, this credit card allowed me to pay off a significant portion of my student loans by taking advantage of such a low APR.

On 6 April, that excellent relationship ceased. I view this mailer as a slap in the face as a consumer. I honored my end of the card agreement by making on time payments, staying within the bounds of my credit limit, and maintaining an excellent credit history. I generated profit for your organization by carrying balances on the credit card. In return, I was notified - without any informative explanation - that the terms of my credit card agreement with BoA were being changed. According to the mailer, as a customer, I have no realistic recourse to fight these actions. While the mailer informs me that I may reject the increase and keep my current APR; I can never use the credit card again without the APR automatically increasing to the higher, variable rate. As a consumer of BoA services, I feel trapped.

When I inquired with BoA customer service by phone on 6 April, the representative (Alex) and his supervisor (Vanessa), were both very professional and upheld the standard of BoA customer service I have known and to which I have been accustomed. I was informed that the rate increase was the result of "intra-bank lending rate increases" and the "economic conditions." I understand that, per the original credit card agreement, "The APR, fees, and other terms of [the] account are subject to change in accordance with the provisions of [the] Credit Card Agreement." I find it counter-productive, however, that in a time when the American economy is in need of people purchasing and spending, BoA would make it more difficult and costly for its customers to do so. When asked, Alex and Vanessa both confirmed that, as a consumer, I have no recourse aside those options laid out in the mailer.

I am writing to you, Mr. Lewis, as a final attempt to maintain a relationship with a BoA, an organization that holds my primary checking, credit card, and investment services. I kindly request that BoA honor the previously agreed upon rates of 7.99% fixed APR for Purchases, Cash Advances, and Balance Transfers. If that is not possible, I will reject the rate increase, pay off my credit balance in full, and I will take my banking needs elsewhere.

Sincerely,

XXX

Enclosure: BoA Mailer, Phone call notes

Cc: The Honorable [redacted]
Secretary of the Treasury Timothy Geithner
Inspector General of the Treasury Eric Thorson
The Federal Trade Commission
----------------------------------------------------

Second, I wrote a letter to BoA officially rejecting the rate increase.

I am now awaiting any sort of return communication from BoA. Evidently, they have thirty days to respond. Any written or oral communications will be published here on DistrictGrind.

1 - http://en.wikipedia.org/wiki/Bank_of_America#Federal_bailout (I recognize this as a horribly WEAK source).