Citi Jacks Card Rates in Face of Reform

Citigroup ( C) sharply increased the interest rates on as many as 15 million credit cards, a move that could spark political backlash as legislators attempt to curb consumer lending abuses, especially at banks that received bailout funds.

Citi has raised its credit card rates on between 13 million and 15 million co-branded credit cards, the Financial Times reported Wednesday, citing people close to the situation.

Holders of co-branded cards who failed to pay their balance in full at the end of the month saw their rates rise by an average 24% -- or nearly 3 percentage points -- between January and April, the FT said, citing a Credit Suisse analysis.

The New York-based financial institution has received $45 billion in government bailout funds last year and more recently agreed to exchange preferred stock for common shares, making the government one-third owner of Citi's stock. And President Barack Obama and Congress have been pushing for reform in the credit card industry.

This spring, Obama signed into law credit card reforms meant to protect consumers from predatory and abusive lending practices, such as unforeseen rate hikes and hidden fees. Citi's rate increases also come to light as his administration sent draft legislation to Congress to create a new agency to oversee consumer protection in the financial industry.

Citi, in a statement to the paper, said it "adjusted pricing and card terms for some customers as part of our regular account reviews."

" This is an ongoing process to ensure we offer terms, interest rates, credit lines and products based on individual needs and risk profiles," the statement continued. "These changes also reflect the dramatically higher cost of doing business in our industry as we work to preserve the broad availability of credit."

Citi's credit card portfolio has experienced massive delinquencies and charge-offs amid advancing unemployment and a sour economy. Other banks, including Bank of America ( BAC), American Express ( AXP), JPMorgan Chase ( JPM) and Capital One ( COF), have also felt the pressure in their credit card portfolios as more consumers have trouble paying their bills.

Citi's move also comes as politicians and observers criticized the troubled bank to raise salaries this year buy as much as 50% to offset declining bonuses in order to keep talent among its ranks.

Shares of Citi were rising modestly as the market opened.

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