Bumping up credit card rates wrong

Just because it’s legal doesn’t make it right.

It’s legal for credit card companies to up the interest rates on unpaid balances for whatever reason they choose.

Doesn’t make it right.

And if the Federal Reserve doesn’t move to stop this unscrupulous business practice, it could undermine the possibility of economic recovery next year.

Last Sunday, AJC reporter Carrie Teegardin documented the practice of “repricing,” a made-up, Orwellian word that tries to make something unprincipled sound legitimate.

Banks have been upping the interest rates on unpaid balances if you make a late payment. Charging late fees is one thing, but upping the interest rate on unpaid balances is changing the rules after the game has started.

And spare us the predictable rationalization about such terms being in the mumbo jumbo, fine-print sleight of hand that passes for disclosure. That makes it legal; doesn’t make it right.

They are also raising the rates because you made a late payment on another bill not associated with the credit card or the bank.

Is it old-fashioned naivete to ask what business is it of the bank’s that you paid somebody else late?

Reports also indicate some credit card issuers will begin raising the rates on what once were considered their best customers —- those who make regular, monthly payments but leave a balance.

Yes, credit has been abused. At all levels. And businesses and individuals need to pare down their debt.

But this economy is based on consumer spending. Want to change to another economy, you might want to clean out the fallout shelter first.

The road to recovery will be led by consumers, particularly the middle class, which right now is getting hit every which way but loose.

“The wealth destruction of this recession has been intense, and it has done much more damage to middle-class households than is typical,” UGA Terry College Dean Robert Sumichrast told more than 1,000 Atlanta leaders at last week’s Georgia Economic Outlook. Recessions don’t typically wreak havoc on both the equity in your home and 401(k) at the same time.

Sumichrast and his team of forecasters see an upturn in the second half of 2009.

But that isn’t going to happen if the consumer gets too badly bruised and abused in the meantime.

The Fed is considering outlawing “repricing.” Can’t happen fast enough. And the ruling ought to be retroactive, as some suspect banks are modifying the terms of the credit cards as fast as they can ahead of an expected adverse ruling.

In the meantime, don’t toss that mailing from your bank, assuming it’s another solicitation or six blank checks for your Christmas shopping. It’s just as likely a confirmation that your bank, after getting a taxpayer-backed bailout, is about to take advantage of you.

toliver@ajc.com