A new settlement between retailers and the credit card industry could leave individuals to pay fees to use their credit card. The industry settled with a collection of retailers to decide on a settlement for $6 billion. Inside the settlement was an agreement that allows retailers the right to pass on merchant fees to consumers. The decision may bring higher prices for credit card users.
The law also shifts the power to credit card users currently in default. Those in default would ordinarily have fees passed on to them as part of the collections process. However, the Fair Debt Collection Practices Act is unaffected by the recent decision. Therefore, collections agencies will find difficulty in collecting overdue balances from people late on their credit cards.
According to a new statistic from Capital One, more than 3% of credit card users – and 3% of credit card balances – are currently in default. In such a scenario, a credit card company would attempt to collect first before turning over balances to a third-party collector. Third-party collectors are known as assigned collectors – those who seek to collect on behalf of someone else who owns the debt. Assigned collectors do not actually own the debt on which they collect.
The credit collections agency may move quickly to enforce new rules that would make it more difficult to default on debt owed by credit card users. As the law is asymmetric, one might suspect that credit collection agencies would seek to level the playing field by seeking new laws that would allow for collections agencies to pass on fees. By law, collections agencies cannot tack on new few for consumers; instead their profits have to come from a fee charged to credit card companies to collect on defaulted credit card accounts.