Card Abuse, Fees and Rate Hikes

Washington, DC: Two new surveys released recently by the government indicated that reforms have led to the near elimination of credit card rate hikes and over-limit charges as well as a reduction in penalty fees, the Washington Post reports.

The Credit Card Accountability, Responsibility and Disclosure Act, which took effect on February 22, 2010, was designed to prevent some of the most vulnerable credit card customers from paying excessive fees and interest rates, according to the news source.

Elizabeth Warren, a special adviser for the Consumer Financial Protection Bureau, said that the changes have been successful for the most part.

“Much of the industry has gone farther than the law requires in curbing re-pricing and over-limit fees,” she said. “Leaders in the industry deserve credit for moving in the right direction.”

However, some card issuers have warned that the new protections offered to vulnerable clients could actually lead to higher charges and interest rates for good customers, according to the news source.

According to Bloomberg, total credit card late fees dropped to $427 million in November 2010, which was down significantly from the $901 million in January 2010.

Despite recent laws passed to protect consumers from credit card abuse, abusive practices reportedly continue to pose a problem. Some abusive credit card practices include credit card rate hikes, credit card fraud, credit card late fees, and credit card over limit fees and credit card annual fees. Some credit card companies are also accused of illegal marketing practices.

CREDIT CARD ACT

In 2010, the Credit CARD (Card Accountability, Responsibility and Disclosure) Act went into effect. The act was designed to limit the amount of credit card abuse customers faced, but some companies are accused of continuing with abusive practices.

Under the Credit CARD Act, companies cannot automatically allow a card to go overlimit and cannot raise interest rates for one year after an account is opened. Once the year is up, lenders must give the cardholder 45 days’ notice before issuing a rate hike

CREDIT CARD ABUSE PRACTICES

Because the credit card companies could lose some of the revenue once generated by fees or interest rate hikes prior to the new laws taking effect, they are looking for other ways to increase their profits. Some companies are accused of illegally marketing optional products associated with credit cards. For example, Discover Financial Services faces a lawsuit alleging customer service representatives phoned Discover clients under the guise of alerting them to optional credit card products but then signed the customers up for those productsóand charged them related feesówithout the customer’s knowledge or consent.

Other companies have taken to increasing balance transfer fees, charging cardholders if their accounts are not used frequently enough and eliminating grace periods on purchases.

Historically, credit card abuse lawsuits involved predatory practices such as unannounced rate increases, unannounced credit reductions, overlimit fees triggered solely by annual fees, and pre-approved and other special offers that are not honored. Some of these predatory practices are prohibited under the Credit CARD Act, but consumers should be aware of their rights to ensure credit card companies follow the CARD Act.

CREDIT CARD ANTITRUST LAWSUIT

Some states, filed a lawsuit against Visa, MasterCard and American Express, alleging those companies violated antitrust laws by preventing merchants from encouraging customers to pay for their purchases with credit cards that have lower merchant fees. If the allegations are true, the companies could be guilty of restricting competition among credit card companies. Visa and MasterCard have reportedly agreed to settle the lawsuit, without admitting wrongdoing. American Express, however, is reportedly fighting the lawsuit.

Having the option of using credit cards that offer lower merchant fees could result in lower prices for consumers.

Credit Card Abuse Legal Help

If you have been a victim of any unfair practices by your credit card company, including substantial rate increases, unfair penalties or broken promises, and would like to take a stand by participating in an action against them, please visit www.www.lawyersandsettlements.com to submit your credit card complaint to a concerned lawyer who will review your claim at no charge.