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Consumer groups blast banks' card 'tricks' - The Red Tape Chronicles - MSNBC.com
Consumer groups blast banks' card 'tricks'
Posted: Tuesday, September 29 2009 at 06:00 am CT by Bob Sullivan
If credit cardholders feel worse off since the passage of the law designed to protect them from banks, that's because they are. An avalanche of new fees, interest rate hikes and other costly changes since the law was signed in May suggest the Credit Card Accountability, Responsibility and Disclosure Act, or the CARD Act, has backfired.
The consumer advocacy group Consumer Action on Monday released a list of such changes since passage of the CARD Act.
Call them CARD tricks, but most consumers aren’t amused.
Consumer Action says since spring, banks have engaged in arbitrary interest rate hikes, increased fees on balance transfers, added annual membership fees and dramatically raised minimum payment requirements.
"The ink was barely dry on President Obama’s signature of the CARD Act when banks started hitting consumers with higher fees and charges,” said Travis Plunkett, legislative director of the Consumer Federation of America. “Congress can’t write laws fast enough to keep up with these tricks and traps."
Consumer Action published on its Web site a gallery of what it said were the worst offenders. Here's some that made the list:
* Bank of America’s Platinum Plus Visa, which increased interest rates by up to 46 percent.
* Capital One, which increased its penalty interest rate by 6.25 percent.
* Citigroup, which began collecting annual fees ranging from $30 to $90.
* JP Morgan Chase, which increased its balance transfer fee to 5 percent.
* JP Morgan Chase, which increased minimum payments from 2 percent to 5 percent. When consumers call asking for relief, they are told the only way to reduce their monthly payment is to accept a higher interest rate.
* HSBC, Chase, American Express and Bank of America, all of which have all closed accounts without warning.
Many issuers also have lowered consumers' credit limits without warning. This limits their purchasing power and hurts their credit score.
When it passed the law, Congress gave the banking industry nearly a year to implement the changes mandated by the CARD Act. Some in Congress now feel that was a mistake. Rep. Barney Frank, D.-Mass., has introduced legislation that would move up the effective date of the remaining provisions to Dec. 1.
Linda Sherry, a spokeswoman for Consumer Action, said the bank changes have turned the CARD Act on its head.
"Unfortunately, people are in a worse place than they were before because of the time period, the window of opportunity the banks had before the law takes effect," she said.
The consumer group released the research this week to lobby for creation of the Consumer Financial Safety Commission, a new federal regulatory agency that has been proposed by Democrats in Congress. The proposal gets a hearing in the House Financial Services Committee on Wednesday.
"This is an example of why we need the (new agency)," she said. "Congress felt it was doing a good thing in giving banks time to get their ducks in a row before the changes, and look what happened." A new agency could step in more quickly than Congress and address allegations of unfair changes in credit card terms, she said.