Update Still Waiting: Unfair and Deceptive Credit Card Practices Continue

October 29, 2009

Banks, Credit and The American Consumer
The Card Game - On air and online November 24, 2009 at 9:00pm (check local listings) Some top authorities on the consumer lending industry accepted FRONTLINE's invitation to weigh in with commentary on the industry, its range of products, and the debate about a new regulatory framework. This blog is part of a FRONTLINE/New York Times joint project, The Card Game, comprising a series of reports by the Times and a documentary by FRONTLINE, which airs Nov. 24th. WATCH A PREVIEW »

"I think this new Pew report -- just out this week -- says it all." --Lowell Bergman, correspondent for the FRONTLINE/New York Times joint report The Card Game, airing November 24th.

One hundred percent of credit cards offered online by the leading bank card issuers continue to include practices that will be outlawed once legislation passed in May takes effect next year, according to a new report by the Pew Health Group's Safe Credit Cards Project. The report also found that advertised credit card interest rates rose an average of 20 percent in the first two quarters of 2009, even as banks' cost of lending declined. With the Federal Reserve currently developing rules to ensure penalty charges are "reasonable and proportional" as required under the Credit CARD Act, the report also includes policy recommendations for regulators.

Key findings of the report show that:

-- 99.7 percent of bank cards allowed issuers to increase interest rates on outstanding balances -- a jump from 93 percent in December;

-- 95 percent of bank cards permitted issuers to apply payments in a way the Federal Reserve found likely to cause substantial financial injury to consumers; and

-- 90 percent of bank cards had penalty rate hikes with the vast majority imposed by "hair triggers" of one or two late payments in a year.

View the full report here.

2 Comments

COMMENTS

Well I am dumfounded by all this Hi flyin talk. If I remember rightly, credit cards were a plastic convenient replacement for cash which allowed retailers to have no problems in accepting the signature and plastic card as real cash.
The catch was initially two fold:-
a) The retailer had to accept less than 100% of the cash price from the card company.
b) The card owner was charged an annual fee for the privilege. This was supposed to cover admin costs and bad debts of delinquents and;
a) Based on volume of purchases by credit worthy
customers delivered the profit.

The problems, some people despite good though less stringent credit checks did not pay on time so overdue interest charges were added, fine and sound economics but the rules, period of charge became complex and usurious.
So called competition intervenes and different services with even more complicated rules and charges are added, main one e.g. you need cash Ok go to our friendly ATM and you can have it, but interest starts day one as though its an overdraft and wow we borrow at 3% p.a but we are charging you 3% a month on that bit and some other excessive rate on overdue balances.
Bottom line it is not a credit card any more it's a Money card or Bank overdraft replacement.
Guess what's next, consumer bubbles and a credit crisis.
Whose fault? As usual both sides consumers, I have had credit cards for 25 plus years and Pay up every month on time no interest charges or cost to me ( if they want an annual fee I cancel the card) and I never ever draw cash with it I go to my bank. Common sense the overdraft rate is cheaper. We are both happy I have the convenience and the card company makes a profit!!
The credit card agencies becoming a lender not a transaction faclilitator for an unfortunately usurious multi tiered level transactions and of varying fees as the risks they undertook grew beyond bank overdraft security and risk levels = Greed both sides.
Back to basics is the answer.
Regards,
Hodgson.

J.V.Hodgson / November 3, 2009 2:39 AM

I want to know WHEN is anyone going to cover the abuses of the credit reporting system? Who are Fair Isaac's customers? Creditors, especially credit card companies. Do credit card companies have a self interest in setting the rules for what actions result in lower credit scores? You bet they do! Lower credit scores mean they have a justification for charging a higher interest rate and therefore make more profit. Only businesses that have a "necessity" product that can be turned off and on electronically benefit. When did our society determine that the failure to pay a debt within three weeks meant someone was a lousy credit risk and had no integrity? I don't think our society has made that decision. Credit card companies have.

Carol / November 3, 2009 9:11 PM

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