Credit Card Companies’ Tactics For Getting Around Rules Designed To Help Consumers

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The Wall Street Journal has posted an article that discusses how some credit card companies are attempting to bypass The Credit Card Accountability and Responsibility Disclosure Act of 2009 (also called the Card Act). The Card Act forced credit card companies to to give customers more notice about changes in interest rates and restricts “certain controversial billing practices such as inactivity fees.”

To make up for loss in revenue the Card Act has caused, some of the biggest credit card companies in the US have started to go around the new rules to slap customers with other types of fees. It’s estimated that the Card Act will eliminate about $390 million in fee revenue per year. Banks are having to get more aggressive to combat such a huge loss.

According to a July 22 report from Pew Charitable Trusts, a nonpartisan research group, the industry’s median annual fee on bank credit cards jumped 18% to $59 between July 2009 and March 2010. At credit unions, annual fees soared 67% to $25. During the same period, the median cash-advance and balance-transfer fees jumped by 33%.

All of these increases are perfectly legal, of course. Banks and other issuers would have a difficult time extending credit to consumers, even at high interest rates, if they couldn’t augment those revenues with fee income. “We’re coming out of a deep recession that issuers are still working through,” says Peter Garuccio, a spokesman for the American Bankers Association.

There have been quite a few “potential violations of the Credit Card Act.” For example, some credit card companies are marketing something new called “professional cards.” Professional cards are like company cards but still carry the same terms as a typical consumer card. Professional cards aren’t covered under the new law and companies are using this as an easy way to get around the Card Act.

In the first quarter of this year, issuers sent out 47 million professional-card offers to U.S. households, up from 13.2 million in the corresponding period last year, according to research firm Synovate.

Because of the Card Act, companies are also becoming more particular about when payments are technically considered late.

Card Act stipulates that late-payment fees shouldn’t be triggered on a Sunday or holiday, when there is no mail delivery.

The rule “is clearly meant to offer cardholders some semblance of relief so that they don’t get saddled with late fees for making a reasonable payment on the next business day,” says Chi Chi Wu, a consumer credit lawyer at the National Consumer Law Center.

Some billing cycles are being altered, also. The Card Act dictates that the actual payment isn’t due until at least 21 days after the bill is sent, however, some people have reported a shortened billing cycle.

Basic fees are also being raised. Many companies are drastically increasing their balance-transfer fee . Inactivity fees will be illegal after August 22, so companies are making alterations, as well. Some companies, like Citigroup, have started to charge an annual fee that the consumer can be exempted from if their balance exceeds a certain amount.

The Card Act says a card’s total annual fees can’t exceed 25% of a borrower’s credit line. But some issuers may be evading the fee restrictions by charging an upfront processing fee that doesn’t fall under the 25% cap.

While the credit card industry is certainly shifting to bend the rules, there are things you can do to avoid some of the worst of it. For example, the most important thing you can do is to make your payments on time. Should a dispute arise about a fee, you should discuss it directly with the card issuer.

“While the Credit Card Act did make great strides in protecting consumers, it in no way closed all avenues for cardholders to get hit with fees,” says Ms. Wu, from the National Consumer Law Center. “It’s a first step.”

If you have had problems with unlawful credit card fees or other credit related problems and have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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