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

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,408.54 -16.31 -0.10%
Nasdaq 4,095.52 9.29 0.23%
S&P 500 1,864.85 2.54 0.14%
Treasuries 2.72 0.08 3.19%
Data as of 6:22am ET
Company Price Change % Change
Bank of America Corp... 16.15 0.02 0.12%
General Electric Co 26.56 0.44 1.68%
Cisco Systems Inc 23.21 0.18 0.78%
Micron Technology In... 23.91 1.43 6.36%
Alcoa Inc 13.56 0.14 1.04%
Data as of Apr 17
Sponsors

Sections

General Mills has scrapped a controversial change to its fine print that some read as eliminating customers' right to sue the company. More

Obamacare sign ups hit 8 million, though final enrollment remains to be seen. More

Office for iPad move is a symbolic victory for Nadella's Microsoft, but the company is still weighed down by many of the same old issues. More

Schwinn, Trek and Cannondale are all iconic American bicycle brands. But none of them are made in the United States. More

Getting people to donate money is a big business, and some universities, hospitals and other nonprofits are rewarding their top fundraisers with as much as $1 million to bring in the big bucks. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.