Card Companies Find More Ways to Dodge New Rulesby Tim Manni
Lawmakers may have thought the new credit card rules — some which have already taken affect, and others that will begin in February — would be able to, in some respects, save borrowers from themselves. But if Congress thought that the Credit Card Accountability, Responsibility & Disclosure Act of 2009 (CARD Act) could save consumers from the credit card companies, they were wrong.
Late last month we already informed you of one loophole the card companies found in the “45-days notice before a rate change” rule. Now personal finance blog WalletPop.com says the companies have found even more.
The rule that states that banks must notify their customers 45 days in advance of any rate increase doesn’t apply to variable-rate credit cards, according to BusinessWeek.com. It has been estimated that 75% of all credit cards issued this year will be variable-rate cards, up about 10% from 2008:
Companies have already rethought rates. Under the new law, issuers can’t raise them without 45 days’ notice. But there’s a loophole: The rules don’t apply to variable-rate cards, with rates that float up and down. That’s why companies are moving more consumers into such cards, whose rates are likely to soar from their record lows.
Another loophole centers on a rule that will not begin until February. At that point, banks are no longer allowed to charge card holders if they spend over their given credit limit. However, one bank has already begun to hedge against this rule with a new fee:
To make up for the lost revenue, issuers are coming up with a host of other penalties. Fifth Third Bank (FITB) started levying a $19 tariff if a borrower doesn’t use the card for 12 months. Notes a Fifth Third spokeswoman: “The fee is used to encourage active use of accounts and to offset the increasing costs of accounts.”
Now enter the Consumer Financial Protection Agency (CFPA) — another sweeping reform (still pending) — that, in part, is designed to protect consumers from the above-mentioned loopholes.
Yet, in a matter of weeks, we’ve already begun to see how limited these types of reforms are at protecting the consumer from some lenders and financial products. There was a very interesting opinion piece in the Wall Street Journal this summer titled “Treating Financial Customers as Consenting Adults,” that called into question the efficacy of the CFPA.
The CARD Act and the CFPA will attempt to protect you from credit card companies and “confusing” mortgage products, but they will never be able to protect you from yourself.