Citi gets religion

If you're late on your car payment or student loan payment or mortgage payment, your credit card company can jack up your interest rate, even if you've never been late with a credit card payment. It's a credit policy called "universal default."

Unfair? You bet. But since when do credit card companies factor fairness into their bottom lines?

Democratic control of both houses of Congress has made an impression on credit card companies. They're reluctant to do what's right, but they surely want to do what's smart. And it's smart not to rile Congress with outrageous credit policies.

Citigroup is eliminating universal default from all Citi-branded credit cards.

"Credit card issuers are announcing unilateral changes in their practices that have been criticized because they are now fearful that Congress will legislate in this area and they don't want that to happen," says Travis Plunkett, legislative director of the Consumer Federation of America.

Harvard prof Elizabeth Warren notes that Citigroup's alteration of its credit card policy comes a week after Sen. Chris Dodd held hearings on credit card practices.

"The Citigroup shift is an important reminder of the power of the Congressional hearing," Warren writes. "So long as the folks in charge of Congress didn't want to upset the credit card companies, the companies kept on adding new tricks and traps. But now direction has changed."

She's correct, and lenders aren't the only entities that are getting the message. In early January, the Senate held hearings on mortgage lending. This week, federal regulators suggested tighter guidelines for underwriting subprime mortgages. Coincidence? No. Word on the street in D.C. is that the feds fast-tracked these proposed guidelines in just a few weeks -- the weeks following the Senate hearings. The regulators now say that companies shouldn't lend money to people who will have a lot of trouble repaying the loans.