The nation's credit card companies have no shame. A federal law passed in May prohibits many of the tactics these companies use to exploit their customers through deceptive practices and hidden fees. But rather than be chastened, the companies have kept right on with business as usual — sometimes ratcheting up the practices — and are intent on grabbing all the profit they can before the law's substantive provisions begin to take effect in February.
This contemptible behavior demonstrates why the Credit Card Accountability, Responsibility and Disclosure Act is so needed and why Congress should move up the law's effective date to Dec. 1.
The banks that issue the nation's credit cards abandoned an honest business model long ago. The name of the game is to gouge customers with hidden penalty fees and manipulation of interest rates. It took a long time for Congress to respond to the chicanery of the industry. When it did, lawmakers granted companies as much as 15 months to implement the changes.
Now a new report by the Pew Charitable Trusts' Safe Credit Card Project says that the companies are using this start-up time to wring every last dollar they can from cardholders. Pew researchers found that the credit cards from the largest 12 banks, representing 90 percent of the market, still employ practices deemed "unfair or deceptive" under Federal Reserve guidelines.
Nearly all of them arbitrarily raise interest rates, impose punishing penalty interest rates after one or two late payments, apply cardholder payments first to the lowest interest rate parts of balances and tack on outrageous penalty fees for late payments. Those practices are either directly prohibited under the Credit CARD act or are indirectly barred by giving the Federal Reserve the authority to dictate "reasonable and proportional" penalties.
The researchers also found that the industry is upping credit card interest rates at a time when the cost of borrowing money is at historic lows. From December 2008 to July 2009, there was an industrywide average increase of more than 20 percent in the lowest interests rates offered.
The credit card industry has proved itself incapable of acting honorably toward its customers. Its cries about not being ready to implement the Credit CARD act by December should be taken just as seriously as it takes the pleas of the customers it squeezes. That is to say, not at all.