Report Reveals Deceptive Practices of Credit Card Issuers
A new research study just released from The Center for Responsible Lending (CRL) finds credit card companies are working hard to find loopholes in order to bypass the new regulations being imposed by the Federal Reserve Board.
This study examined the practices of issuers that hold over 400 million credit card accounts. It found eight tactics used by issuers in the past and currently, due to lack of specific details in the regulations that could have eliminated the current loopholes. These practices make it almost impossible for the average consumer to determine the cost and future implications of their credit card debt.
The eight practices highlighted by the CRL report are:
- Manipulation of interest rates
- Padding of miscellaneous fees
- Deceptive policies on late payment fees
- Imposing minimum finance charges
- Inactivity fees
- International transaction fees
- Additional fees on balance transfers and cash advances
- Variable rates with artificially high floors
The top 8 credit issuers have all increased large late fees on card holders, regardless of the balance current on the card.
CRL’s analysis of the fine print created by card issuers found that a growing number of issuers have added language that allows them to choose the highest prime rate in a 90 day period, no longer the one day prime rate calculation. This change will raise a card holders costs substantially, often without their knowledge. The report says this tactic alone will cost Americans $720 million per year. CRL predicts this amount will increase to 2.5 billion annually in just a few years if credit issuers are allowed to continue this deceptive practice.
The credit CARD Act of 2009 will eliminate some of the worst abuses enacted by credit issuers, but credit card issuers have proven that they can and will find ways to evade any new regulations created to protect the consumer.
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