The CARD Act - Does It Deserve a 10?
Yesterday, the Pew Safe Credit Cards Project released a report evaluating the good and bad changes that have occurred since the CARD Act was implemented almost a year ago. According to the report, the new law did eliminate most of the "unfair and deceptive" credit industry practices. In March 2010 the project accumulated data on 450 credit cards offered online by the 12 largest banks and 12 largest credit unions. These 24 financial institutions control over 90% of U.S. credit card debt.
Below is a summary of the report findings:
THE GOOD NEWS
Many of the credit card issuer practices that resulted in a spike in interest rates and overdraft fees have been eliminated. As a result of the CARD Act card issuers can't unilaterally raise interest rates on existing balances, can't give abusive penalty rate increases, allocate payments unfairly or charge over-limit fees without consent. (Less than 25% of the cards had an over-limit fee in March 2010 compared to 80% of cards in July 2009.)
Mandatory arbitration clauses which limit a cardholder's right to settle disputes in court appear in approximately 10% of cards now as opposed to 68% of cards in July 2009.
New and sharply higher annual fees have not appeared in response to the CARD Act. According to the report, there was virtually no change in the number of cards requiring an annual fee, and for those that did charge a fee, it went from $50 to $59 for banks and from $15 to $25 for credit unions.
Continued on the next page
THE BAD NEWS
Financial disclosure of penalty interest rates has decreased in the last year. Now, 94% of bank cards and 46% of credit union cards come with penalty interest rates for late payments and other violations but in about half of these cards disclosure information failed to mention how high the penalty interest rate could go.