Banks play hardball on credit

The Baltimore Sun

Two years ago, Bank of America gave Brian DeCunzo and his wife an unsecured line of credit for $40,000 - two-thirds of the couple's annual income.

The Hampstead landscaper used about $23,700 of the line to pay off loans and consolidate other debt.

That was then.

Bank of America recently lowered the credit limit to $24,300. Suddenly, it appears the couple is maxed out and their credit has suffered as a result, DeCunzo says. A bank official told the couple their credit limit was cut because their debt level had gone up, but DeCunzo says they have less debt now than when they opened the account.

"This is just a shock," the 36-year-old says. "I did everything they asked me to do."

Stories like this are becoming more common.

Banks that not long ago were throwing credit at consumers are tightening the reins. They are slashing credit limits on unsecured debt, such as credit cards and the lines of credit like DeCunzo's.

And in some cases, they are changing terms. Some Maryland JP Morgan Chase customers complain they now are being charged a $10 monthly fee on certain low-rate cards.

Customers feel blindsided and angry.

DeCunzo, for instance, says he has never done anything to be considered high-risk, and he feels he is paying for the bank's other business troubles. The couple, DeCunzo says, have high credit scores, and the bank had even lowered their interest rate over the years.

And they always pay on time, making at least the minimum payment. He thought about closing the account, but he could not find another credit line offering anything close to what he had.

Bank of America spokeswoman Betty Riess says she cannot comment on DeCunzo's case, but she acknowledges that the lender is "closely monitoring for risk and may adjust some customers lines based on their risk profile and performance with us."

Consumer advocates say a $40,000 unsecured line of credit was exceptionally generous, but they add that the bank's steep cut in available credit was heavy- handed.

Advocates offer a few solutions. They suggest the DeCunzos join a credit union, if possible, where credit terms are likely more favorable.

DeCunzo should not close his Bank of America account, says Jean Ann Fox with the Consumer Federation of America. Having a history of timely payments shows you can handle credit and improves a credit score, while closing the account can lower it, she says.

And DeCunzo should more rapidly pay down his debt, which will increase the available credit, Fox says.

The couple should make smaller payments every other week, rather than a bigger one once a month, which will result in them paying less in interest, says Curtis Arnold, founder of CardRatings.com.

As for complaints about the Chase credit card, some Marylanders say the company enticed consumers years ago to transfer card balances by promising a 3.99 percent rate as long as the balance remained. Chase recently started charging these customers a $10 monthly fee and more than doubled the monthly minimum payment.

John Bangs of Jarrettsville was among many who transferred a big balance to Chase. He is upset that the same banks receiving taxpayer bailout money are playing hardball with customers.

When he called to complain, Chase told him he could avoid the fee and minimum payment changes if he agreed to have the interest rate on his card doubled. He grudgingly accepted "because I didn't want to have my payment go up by $300 a month," says Bangs, a sales representative whose income can fluctuate.

In an e-mail to The Baltimore Sun, Chase said less than 1 percent of its accounts are affected. "Those who are impacted have carried large balances for over two years while making little progress in paying them off," the company said.

That may not be the end of it. A lawsuit seeking class action status was filed last month against Chase in California.

Suggest a topic at eileen.ambrose@ baltsun.com or 410-332-6984.

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