New Study Cites 'unfair and deceptive' Credit Card Practices
A new report from the Pew Charitable Trusts details the extent of some of the “unfair and deceptive practices” by credit card companies.
The year-long study by Pew was led by the former CEO of a credit card company and involved more than 20 credit card providers and consumer groups. It looked at credit cards offered online by the 12 largest issuers, which control more than 88 percent of outstanding debt in the country, and covers roughly 400 cards. Here are some highlights from the report:
* 93 percent of cards allowed the credit card company to raise your interest rate at any time by altering the account agreement.
* 87 percent of cards could raise the rate on all of your balances even if you are not 30 days past due. The average penalty rate was 27.99 percent.
* In one year, credit card companies raised rates on about 70 million accounts — about a quarter of all open accounts. That has resulted in about $10 billion in additional fees and charges.
In December, new federal regulations were issued that impose sweeping changes in the credit card industry, limiting these so-called “unfair and deceptive practices.” But those rules don’t take effect until 2010, so this week both the House and the Senate are looking at legislation that would enact similar rules before then. Maryland is also considering a bill that would ban such practices in the state.
But credit card companies — and even the Federal Reserve — say it simply is not possible to overhaul the industry before the 2010 deadline.
We have a love-hate relationship with credit cards. They allow us to enjoy a new flat-panel TV as soon as we want it — and even get a few airline miles in the process! But we all cringe at the interest rates if that TV turned out to be more than we could really afford.
These are some of the most important financial issues facing consumers today, particularly at a time when money is tight all around. Folks are being forced to live off their credit cards when they get laid off and others say they are being overwhelmed by penalty rates and fees.
What do you think should happen and what has been your experience with your credit card company? How flexible, or not, have they been?
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