Citibank Gives Federal Reserve The Middle Finger
Congress and the Federal Reserve are currently considering legislation and regulation to alter potentially deceptive and misleading practices in the credit card and banking industry. If you haven’t seen the proposals already, and would like more information, then you can get find it at the Federal Reserve’s press release here and the subsequent press release on risk based pricing disclosure here.
One measure that the Federal Reserve is considering deals with the credit card company policy of increasing interest rates on consumers that miss the payment deadline. Essentially, the new policy would prohibit rate increases because of a late monthly payment unless the payment was not received within 30 days of the deadline.
The credit card industry has promised to fight the proposals - and I think Citibank had the honor of sending the Federal Reserve the opening salvo. Either that - or it was one of the worst timed implementations of a policy in the history of Corporate America.
12 whole days after the announcement of the Federal Reserve’s proposed policy on May 2, Citibank sent an email to those people who have student loans held by Citibank that begins:
Dear Valued Student Loan Customer,
We are writing to inform you about important changes to the terms of your loan.
To retain your borrower benefits with us, you must make and have your payments posted to your account no later than the scheduled due date. Any payment posted after the due date will result in the termination of such benefit.
As I read it, (and Consumerist as well) Citibank will take away any interest rate benefit on your loan after a single late payment.
But the plot thickens - and it gets worse. Citibank’s statement requires that the payment be posted by the due date. As some who have had unfortunate run-ins with the student loan division at Citibank know, Citibank doesn’t credit your student loan account for an online payment until two business days after the payment is scheduled - basically, it waits until it receives the funds. So in reality, you must make your payment two days in advance of the deadline in order to avoid losing any interest rate benefits that you have with Citibank. Amazingly - though- Citibank finds a way to credit payments made online to credit cards on the same day (as long as they are made before 5 pm eastern on a weekday).
If that’s not enough - when you go to pay your student loan online and you, of course, discover that your payment is not going to post by the deadline, you’ll have to pay by phone and - although I can’t find anything about it on the website - a PAY BY PHONE FEE (the elimination of pay by phone fees, btw, is in a proposal in Congress - read more here).
Isn’t this exactly the type of practice that the Federal Reserve and Congress are currently trying to prohibit in the banking industry? So why would Citibank, which has a rather large credit card division and is obviously aware of these proposals, implement such a student loan policy now other than to give the Federal Reserve and Congress the middle finger?
How can you return the favor to Citibank? The Federal Reserve is currently taking public comments on its banking regulation proposal. You can tell them what you think about Citibank’s actions here. Just click on the submit comment link under Regulation AA at the bottom. Tell the Fed that you support their policy on the regulation of deceptive credit card practices - and hope that they will consider extending it to prevent Citibank from implementing similar measures in its student loan division.
[...] majority of its customers and federal legislators and regulators as well. Citibank started with a controversial new student loan policy announced after the Federal Reserve proposed regulations that would prohibit the announced [...]