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The recent challenging market conditions created much not only on traders and companies, but also cause some big names to break promises they had made to consumers. Eric Dash of The New York Times tells of one such promise that may now be repealed. Last year, Citigroup Inc. (NYSE: C) promoted the "deal is a deal" slogan, promising to millions of people that the company would no longer lift reserve interest rates on cards at any time, for any reason.However, as Dash explains, times have changed and in the current weak environment the bank is reconsidering its decision because of financial troubles. A year ago, the company said it would no longer use the "universal default" practice where a card issuers can raise the holder's rate when that person is late paying any bill. What the bank still held was the right to raise rates every two years, when people renew their cards.
At the time, it looked like Citigroup's decision was efficient as rivals such as Chase Card Services followed the company by announcing it would abandon the "universal default."
What made Citigroup change its mind were the $40 billion in write-offs the company has taken during the last year on mortgages investments. In addition, the slumping economy has added pressure on its credit card business.
A major impact on credit card lenders has been federal banking regulators and Congress, which have set up rules designed to protect consumers amid the weak economy, limiting the banks' flexibility to increase rates of riskier customers.
Now, after a year, Dash writes that the company is disappointed over its "Deal Is a Deal" policy as results were not as expected. "We have been disappointed with the results we have seen so far," Citigroup stated. Probably consumers will have the same thoughts after the bank will be forced to break its promises.
Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.
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