With new federal credit-card regulations on the horizon, banks and card providers are boosting interest rates, fees and minimum payments, according to news reports.
Before the Credit Card Accountability, Responsibility and Disclosure Act takes full effect in February 2010, credit-card issuers are “raising annual percentage rates, slashing credit limits and hiking minimum payments,” writes Dallas Morning News columnist Pamela Yip.
She also cites a loophole on a regulation set to kick in Aug. 20, requiring companies to issue a notice 45 days in advance of any rate increase.
Yet the law only applies for cards with fixed rates; variable rate cards, which account for two-thirds of all cards issued, are excluded.
Now, a growing number of banks and credit-card providers are swapping fixed rate cards for ones with variable rates to sidestep the guidelines, reports the Hartford Courant.
In Minnesota, State Attorney General Lori Swanson is targeting mandatory arbitration, which American Banker describes as a means by which card providers “divert consumer lawsuits into the privately run arbitration system.”
Swanson has already take one company, the National Arbitration Forum, out of the business, after suing it for “deceitful practices,” such as failing to disclose their ties to the collection industry, and for using “fine print contracts” that target “the little guy.”
The U.S. Chamber of Commerce has accused Swanson of getting too political.
Minimum payments are also on the rise. Chase, which recently acquired Washington Mutual, is boosting minimum payments on balances from two to five percent effective in August, notes the Daily Kos.
“Next Consumer Backlash: Mandatory Arbitration”
American Banker, July 21, 2009
“U.S. Chamber: Minnesota AG should not Leverage Arbitration Lawsuit to Benefit Trial”
PR Newswire. July 21, 2009
“Think your credit card’s stable? Think again.”
Dallas Morning News. July 18, 2009
“Credit Card changes: loophole is variable rates”
Hartford Courant, July 13, 2009
“Attorney general Swanson sues National Arbitration Company for deceptive practices”
Press Release, July 14, 2009
“Warning: Banks preying on customers before credit law starts”
Daily Kos, June 26, 2009