Make us your home page

Review finds credit card companies tighten screws on consumers before new law takes effect

NEW YORK — Not only have credit card companies continued to use practices that will be outlawed under a strict law due to take effect in February, in many cases their policies have gotten harsher since the law passed.

A review of nearly 400 cards offered by the 12 largest U.S. card issuers found nearly all contracts still allow banks to raise interest rates on outstanding balances. Most also still have penalty interest rates that can be triggered with just one or two late payments or overlimit transactions. And most still allow banks to apply payments to the lowest interest portion of balances first.

All of these policies are prohibited under the legislation, the Credit Card Accountability, Responsibility and Disclosure (or CARD) Act, which was signed by President Obama in May. Congress phased in the provisions to give credit card companies time to adjust their policies, but is now considering moving the effective date up to Dec. 1, because of continued complaints from consumers.

"It's clear that until the law takes effect, or Congress accelerates the implementation date of the law, these practices are going to continue to be out there," said Nick Bourke, co-author of the study done by the Pew Charitable Trusts' Safe Credit Cards Project. "Once it takes full effect next year, it's going to stop a lot of unfair and deceptive practices."

The biggest change, he said, will be that banks won't be able to do things like change interest rates or other terms without warning the card holder. "Right now, the credit card company can rewrite the contract at any time," Bourke said.

The study examined cards offered by the banks that control more than 90 percent of outstanding credit in the country. It found that from December to July, the lowest interest rates offered rose by more than 20 percent. Penalty interest rates, which can be imposed for just one or two late payments or overlimit charges, also rose, and banks added or raised fees for things like balance transfers, cash advances and overdraft protection.

In contrast, Pew found that the 12 largest credit unions, which have just 1 percent of the market, have lower interest rates, lower fees and less punitive policies. Most still have contracts that allow them to change the terms at will, or take other actions the law will prohibit. But even when credit unions have things like penalty rates or overlimit fees, they tend to be less expensive than banks, the study said. For instance, credit unions offer cards with average late and overlimit fees of $20, vs. $39 for banks.

Bourke said it's important to note that while the law has many provisions, there was also a big chunk of policy left for the Federal Reserve to spell out in new regulations, including defining "reasonable" fees and "fair and deceptive practices." He said highlighting credit unions' generally lower costs may help influence what the Fed defines as fair and reasonable.

Review finds credit card companies tighten screws on consumers before new law takes effect 10/28/09 [Last modified: Wednesday, October 28, 2009 10:19pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.

Join the discussion: Click to view comments, add yours

  1. Federal agencies demand records from SeaWorld theme park


    ORLANDO — Two federal agencies are reportedly demanding financial records from SeaWorld.

    Killer whales Ikaika and Corky participate in behaviors commonly done in the wild during SeaWorld's Killer Whale educational presentation in this photo from Jan. 9. SeaWorld has been subpoenaed by two federal agencies for comments that executives and the company made in August 2014 about the impact from the "Blackfish" documentary. 
[Nelvin C. Cepeda/San Diego Union-Tribune/TNS]
  2. Legalized medical marijuana signed into law by Rick Scott

    State Roundup

    TALLAHASSEE — Gov. Rick Scott on Friday signed into law a broader medical marijuana system for the state, following through on a promise he made earlier this month.

    Gov. Rick Scott signed legislation on Friday that legalizes medical marijuana in Florida.
  3. Line of moms welcome Once Upon A Child to Carrollwood


    CARROLLWOOD — Strollers of all shapes and sizes are lined up in front of the store, and inside, there are racks of children's clothing in every color of the rainbow.

    At Once Upon A Child, you often as many baby strollers outside as you find baby furniture and accessories. It recently opened this location in Carrollwood. Photo by Danielle Hauser
  4. Pastries N Chaat brings North India cuisine to North Tampa


    TAMPA — Pastries N Chaat, a new restaurant offering Indian street food, opened this week near the University of South Florida.

    The menu at Pastries N Chaat includes a large variety of Biriyani, an entree owners say is beloved by millions. Photo courtesy of Pastries N Chaat.
  5. 'Garbage juice' seen as threat to drinking water in Florida Panhandle county


    To Waste Management, the nation's largest handler of garbage, the liquid that winds up at the bottom of a landfill is called "leachate," and it can safely be disposed of in a well that's 4,200 feet deep.

    Three samples that were displayed by Jackson County NAACP President Ronstance Pittman at a public meeting on Waste Management's deep well injection proposal. The sample on the left is full of leachate from the Jackson County landfill, the stuff that would be injected into the well. The sample on the right shows leachate after it's been treated at a wastewater treatment plant. The one in the middle is tap water.