Companies Seek to Circumvent New Credit Card Reforms

Credit card companies have responded to the passage of the Credit CARD Act by creating new ways to get around the law and exploit consumers.

According to a recent Center for Responsible Lending (CRL) report, “Dodging Reform: As Some Credit Card Abuses Are Outlawed, New Ones Proliferate,” credit card companies have devised eight tactics to circumvent the new law. Among these are minimum finance charges, tiered late fees, inactivity fees, fees for transfers or cash advances, along with other practices which result in overall higher monthly payments.

While the Credit CARD Act includes protections against some of the most costly consumer traps, it does not protect against any of the tactics listed in the CRL report. Many of these practices were implemented only after the passage of the Credit CARD Act. Unfortunately, even a consumer who reads a bill or statement in detail would find it virtually impossible to protect him or herself from these practices.

In the report, CRL reiterates support for the proposed Consumer Financial Protection Agency, which would have oversee mortgages and many other consumer financial services and products, such as credit cards, checking and savings accounts, credit reports/scores, payday loans, residential leases, and wire transfers. CRL says that the new agency could protect consumers better by responding in real time to predatory and abusive practices like the ones in the report.

The new agency is supported by a broad coalition of civil and human rights groups and consumer advocates including The Leadership Conference.