Citigroup eases credit card rate-rise policies

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By Dan Wilchins

NEW YORK, March 1 (Reuters) - Citigroup Inc. (C.N: Quote, Profile, Research, Stock Buzz), the third-largest U.S. credit card issuer, said on Thursday that it will no longer automatically raise interest rates for cardholders who default somewhere else.

"Universal default," which involves raising rates when a person defaults on obligations to other lenders, has long been under fire from consumer advocates who argue that it victimizes poorer borrowers.

Citi also said that it will no longer raise borrowing rates and fees for consumers before their cards expire, which is typically two years after they are issued. Credit card issuers have traditionally been allowed to boost rates and fees at any time, for any reason.

The changes were announced five weeks after a Senate Banking Committee hearing at which card industry critics pressed for increased scrutiny on billing, marketing, and disclosure practices.

The United States is a nation of debtors. According to the Federal Reserve, there was about $2.4 trillion of outstanding consumer debt as of Dec. 31. About a third of that is estimated to be credit card debt.

American consumers have about 1.5 billion credit cards, including retail store cards, gas station cards and general purpose charge cards like Visa or MasterCards, according to the Nilson Report.