Mortgage mess hits other borrowers

February 27, 2008 3:32:51 PM PST
The sub-prime loan crisis is like an octopus, its tentacles reaching out to all kinds of borrowers including credit card customers and folks taking out student loans. Some banks are denying there's a direct correlation, but there's no question, facing losses on bad housing loans, they need to make up that money somehow.

"It's unfair. It seems to me unethical."

Demetrius Trihoulis is talking about his credit card company trying to double his interest rate. Bank of America sent Demetrius a letter saying his A.P.R would shoot up to 27.99% unless he rejected the new rate by February 29th.

"I think they're hoping to catch a lot of people not paying attention."

Demetrius was able to lock in his current interest rate but wonders why Bank of America tried to raise his A.P.R. at all. He said he always pays on time and never goes over his limit.

"I contacted them and they kept talking about mitigating loss." Demetrius explained. "The person on the phone who was a supervisor said Bank of America is here now and we want to be here next year," he said. "I was horrified by that."

Bank of America said "we periodically review the credit risk for each account and may reprice individual accounts if we see a change in risk. Rate increases affect a very small portion of its credit card accounts."

"Banks are in this to make a profit and they're hoping you will maintain a balance and pay the highest interest rate because they'll make more of a profit," said Patty Hasson of the Consumer Credit Counseling Service. "Legally credit card companies can do this. Read the fine print in your agreement."

Also call your creditors to see if your rates are changing. Ask that your rate be lowered, or at least, locked in. Also go through your mail and monitor your statements carefully. And now more than ever it is important to check your credit report as well.

If you pay your college tuition using federally insured loans you'll have to borrow money from banks instead of the state's student loan agency.

Starting March 7th the Pennsylvania Higher Education Assistance Agency will temporarily stop giving new loans made through the Federal Family Education Loan Program.

The agency's acting president said the action is a direct consequence of turmoil in the bond market caused by the national sub-prime mortgage disaster.