Most Credit Cards Are Unfair according to Study
A report by most credit cards in the U.S. include at least one practice that qualifies as “unfair and deceptive” under new Federal Reserve guidelines set to go into effect in 2010, according to a report from the Pew Safe Credit Cards Project.
Reviewing consumer credit cards issued by the 12 largest companies, and which represent 88% of outstanding credit card debt, the researchers found:
- • 100 percent of cards allowed the issuer to apply payments in a manner which, according to the Federal Reserve, is likely to cause substantial monetary injury to consumers.
- • 93 percent of cards allowed the issuer to raise any interest rate at any time by changing the account agreement.
- • 87 percent of cards allowed the issuer to impose automatic penalty interest rate increases on all balances, even if the account is not 30 days or more past due. The median allowable penalty interest rate was 27.99 percent per year.
- • 72 percent of cards included offers of low promotional rates which issuers could revoke after a single late payment.
The project called for legislation that would outlaw such practices sooner and recommended guidelines that would ensure:
- Cardholders are charged only the interest rates they agreed to pay;
- Fees are imposed responsibly and in a transparent fashion;
- Cardholders have sufficient time to review and pay their bills; and
- Interest is not charged on balances cardholders have already paid.