Cardholders are getting hit with fewer penalty fees and surprise
interest rate hikes thanks to the Credit CARD Act of 2009, which
ended a host of tricks and traps, according to consumer
Not quite -- in fact, a sequel to the
Credit Card Accountability, Responsibility and
Disclosure Act of 2009
could be in the making, as regulators mull over a
fresh batch of complaints
. Although bankers say the consumer protection law has dried up
available credit for many people, watchdog groups point to a list
still-thriving credit card problems
that they say should be fixed.
"The CARD Act has been very successful," said Pamela Banks,
senior policy counsel for financial services at Consumers Union.
"But the problem is, when you fix some things, other issues crop
Consumers Union is one of the groups that filed official appeals
for action with regulators. The bulging comment file also contains
broadsides from the National Consumer Law Center, the Center for
Responsible Lending and the Pew Charitable Trusts.
Regulators at the Consumer Financial Protection Bureau collected
the comments earlier this year about the post-CARD Act environment.
The CFPB plans to issue a study in coming months that will look at
the law's impact on the availability of credit, and at how card
issuers' practices are affecting consumers.
Sounding off about cards
Several groups pointed at
cards as the most dangerous trap lying in wait for unwary
borrowers. Known as a way to buy major items such as appliances,
the delayed interest deals are also becoming popular with some
doctors and dentists as a way for their patients to finance
expensive medical procedures.
"People use delayed interest as a way to afford a washing
machine or whatever they need," Banks said. "But these credit card
contracts are very complicated."
One unwary Denver resident named Janine told Consumers Union
that she and her spouse wound up paying more than $1,000 in
surprise interest on a deferred deal. Having made their first
payment in October, the couple figured that the final payment on
the one-year deferral would come the folloing October -- but that
was a month late. As a result, they were charged the full year of
accrued interest, which took a few more months of payments to
erase. "There was never any statement of final balance due by "x"
date to avoid interest charges," she was quoted as saying in the
The cost of credit
It isn't deferred interest that bothered Edward Jankauskas, a
retired postal worker in Philadelphia, just the high level of
interest rates in a low-rate economy.
"As a consumer and user of credit cards, it still baffles me why
credit card companies charge as much as 29.9 percent interest,
while the prime rate has been at 3.25 percent and the federal funds
rate at 0.25 percent," he wrote in a January filing.
Blame the CARD Act for
, says the American Bankers Association. Card rates are up about
0.73 of a percentage point since late 2008, the group said, even
while rates for other consumer credit have plunged. And fewer
subprime borrowers are able to get cards at any rate, driving them
into the arms of payday lenders and other higher-cost loans,
according to the industry group.
"There was a great contraction in credit," said Nessa Feddis,
senior counsel at the ABA. "The fact that it has not recovered with
the economy suggests it is related to the CARD Act."
Consumer groups counter that the rates consumers actually pay on
their card balances is about the same as before the CARD Act was
enacted, when you factor out the effects of the recession. What's
new is that advertised rates, especially for subprime cards, have
gone up because lenders are no longer able to keep them
artificially low by piling on fees instead. Even an increase in the
overall cost of credit isn't necessarily harmful, the NCLC argues,
if it has stopped practices that soaked subprime cardholders in
order to subsidize the perks enjoyed by others.
The road ahead
No one is predicting that new protections are a slam dunk. But
neither is it likely to see the CARD Act's protections rolled back
or watered down.
"The (banking) industry is not trying to change the CARD Act,"
said Lauren Saunders, managing attorney of the NCLC's Washington,
D.C., office. Rather, card issuers continue to make the argument
that further regulation will restrict the availability of credit
and raise the costs, she said.
The biggest barrier to new protections may be the consumer
protection bureau's own busy schedule. With action pending on
payday loans and examinations of debt collectors under way,
resources for a new push on credit card protections could be thin.
The CARD Act mandates that the agency produce the report, but no
rulemaking is required. "There are still credit card issues out
there," Saunders said. "They've just got a lot of stuff going
Consumer bureau begins new look at credit card