Senators probe surprise credit card rate rises

By Kevin Drawbaugh

WASHINGTON (Reuters) - As consumers whip out their credit cards for another holiday shopping binge, a U.S. Senate panel on Tuesday will examine surprise interest rate increases, even for cardholders who scrupulously make payments on time.

"Working people are being squeezed. That's something which is intolerable and we're going to try to shed some light on it," Michigan Democratic Sen. Carl Levin told reporters on Monday.

The chairman of the Senate's wide-ranging Permanent Subcommittee on Investigations said his panel has found some card companies charging rates as high as 30 percent, even for consumers "faithfully paying" their credit card bills.

Charges are sometimes applied retroactively to existing balances and often card holders have trouble getting a straight answer about why their rates have been raised, Levin said at a briefing ahead of a subcommittee hearing set for Tuesday.

"The fact that this is the holiday season, it's an appropriate time to be having this hearing," he said.

"Credit cards will be pulled out of wallets to make purchases in record numbers this holiday season. These abuses need to be remedied and that's what our goal is."

With Americans carrying more than $900 billion in credit card debt, card companies are under growing pressure to change disclosure policies, fee structures and interest rate practices that Levin said "frequently amount to gouging."

An American Bankers Association executive said interest rates can change on credit cards for various reasons.