Credit Card Reform Eliminates Deceptive Practices

Credit card reforms in the form of card offered online by twelve of the biggest United States banks have eliminated many deceptive practices that have been troubling consumers for a while, according to the Pew Charitable Trusts.

The Philadelphia-based non-profit organization showed the findings of its report last July 22 Thursday, in which the increasing interest rates of cardholder’s existing balances for some of the card agreement infractions and that payments being applied to low interest rate balances have ended. The Pew Charitable Trusts report also inspected over 450 cards that were advertised by credit unions and banks, and then compared terms for those that had been offered in July 2009 and March 2010.

These changes that take effect by stages are the effect of the Credit Card Accountability Responsibility and Disclosure Act, where its provisions comprise the limiting of rate increases and the requirement of banks to apply payments to balances with higher rates. Most rules prescribed by the act had taken effect by Feb 22, while others had began by Aug 20 back in 2009, and then some more (which includes the prohibiting of excessive late-payment fees) would take effect this coming Aug 22.

According to the director of Pew Charitable Trusts’ Safe Credit Cards Project, Nick Bourne, the effect of these changes is that the market has become more transparent and that deceptive credit card practices that are harmful to credit users have also lessened.

The report also added that the penalty rates for delinquent actions like missed payments are still widespread, and that the median penalty rate went up to 29.99% while half of the inspected bank cards did not disclose their penalty rates. Some credit card issuers also did not specify what would trigger the rates increases or what cardholders could do to lower their rates.

Bank of America spokeswoman, Betty Riess, stated that they review their customers on a case to case basis who were 60 days past their due to decide whether or not they should re-prise the account. Riess added that they do not have an automatic trigger for that to happen. Riess also stated that their customers would be notified of any increase in their rates, and they would also be given the choice and opportunity to close the account if they want.

The bank cash advances and balance transfer median fees also went up from 3% to 4%. While 14% of the bank cards that were surveyed had an annual fee that was compared with the 15% of last July 2009, and the median annual fee rose from $50 to $59. The report also added that there were no indications that there was a trend of add new fees.

Kenneth Clayton, senior vice president of the American Bankers Association in Washington, said that the credit card industry is doing the best it can to implement the changes brought about by the law and to remove any deceptive practices harmful to consumers.