Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

New wave of credit card abuses

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- A 2009 federal crackdown on abusive credit card practices has exposed a litany of other ways consumers are being hosed.

That's according to a report released Thursday examining the Credit Card Accountability Responsibility and Disclosure Act.

When will you be debt free?
Enter credit card information
  CC name Balance
($)
Rate
(%)
Minimum
payment($)
1
2
3
Choose a plan
Minimum payments only
Fixed payments
$ monthly
Debt-free deadline
I want to pay off my credit cards in:
years and months

The study, from the Pew Health Group's Safe Credit Cards Project, found that most of the practices deemed "unfair" or "deceptive" by the Federal Reserve under the law have disappeared from new credit card offers since Congress passed the law.

"Most of the news is good, but we are seeing the rise of new harmful behavior," said Shelley Hearne, managing director of the Pew Health Group.

For example, issuers have been increasing fees for cash advances and balance transfers. Banks have hiked those fees to a median 4% as of March from 3% in July 2009, according to the study. Credit union cash advance fees rose to 2.5% from 2%.

The Pew researchers also found that penalty rate increases, which are not subject to CARD Act rules, remain widespread.

According to the study, 94% of bank cards and 46% of credit union cards included penalty rate terms. The median penalty rate, when disclosed, rose to 29.99% in March from 28.99% in July 2009.

At the same time, the study found that some credit card disclosures stopped including the size of penalty interest rates, even as issuers reserved the right to impose them.

"Federal regulators should pay attention to this problematic new trend," said Nick Bourke, a Pew director and co-author of the report. "When issuers withhold vital pricing information, it leaves cardholders in the dark and puts their financial security at risk, which is why federal regulations have long required issuers to disclose their rates and fees up front."

The study was based on a review of written application disclosures for nearly 450 credit cards and was conducted in March. It covers the largest 12 banks and largest 12 credit union issuers, which control a combined 90% of the nation's outstanding credit card debt.

On the positive side, the study found that credit card issuers have done away with "hair trigger" penalty rate increases, in which consumers are charged fees for minor account violations. In addition, unfair payment allocation and interest rate hikes on existing balances have also been eliminated.

Credit card issuers have also curtailed the use of over limit fees, which were present in 25% of all cards examined in March, compared with 80% in July 2009. Mandatory arbitration clauses that limit a consumer's right to settle disputes in court have also become less prevalent. To top of page

Index Last Change % Change
Dow 18,179.31 84.48 0.47%
Nasdaq 5,285.10 27.61 0.53%
S&P 500 2,154.35 8.25 0.38%
Treasuries 1.56 -0.03 -1.83%
Data as of 12:12pm ET
Company Price Change % Change
Bank of America Corp... 15.22 0.13 0.89%
Chesapeake Energy Co... 6.16 -0.46 -6.95%
Procter & Gamble Co 88.23 0.38 0.43%
Ford Motor Co 11.99 -0.02 -0.17%
Freeport-McMoRan Inc... 10.02 -0.49 -4.71%
Data as of 11:57am ET
Sponsors

Sections

The Labor Department said it is reviewing both open and closed whistleblower complaints against Wells Fargo amid allegations the bank retaliated against employees. It is part of a "top-to-bottom review" ordered by Labor Secretary Thomas Perez related to Wells Fargo and includes allegations that the bank may have violated federal law by failing to pay workers overtime. More

Donald Trump doubled down his crusade against America's trade deals and his attacks on Ford and Carrier. More

Working Mother magazine has released its annual report of the 100 best companies for 2016. And there's some good news for new moms. More