The Credit Card in 2010

The new Credit Card Accountability, Responsibility, and Disclosure Act will go into effect February 22, 2010. Americans will see stronger consumer protections against interest rate hikes within the first 12 months of opening an account and easier to understand monthly statements. College students will no longer be easy prey for credit card companies. However, will consumers be the only winner?

Credit card companies went into full attack mode as soon as the act was announced. Finding loopholes became an industry norm and interest rates soared to the highest levels seen in many years. Banks now charge a penalty annual percentage rate for a payment that is one day late and will continue to double cycle bill until it is prohibited on February 22.

What else can consumers expect?

Banks will now begin to place limits on inactive cards. Inactivity fees or a reduction in credit limits are two penalties consumers will see if cards sit inactive for a long period. Some banks will close inactive accounts.

Inactive accounts do not make money for banks. They do not have interest fees or other fees from which to garner funds. The bank does have to print and send the card and monthly billing statements which results in a profit loss to the credit card company.

Consumers can now expect banks to consider more than credit scores when issuing credit cards. It is no longer enough to keep a good credit rating to qualify for a high credit limit. Credit card companies look at environmental issues and other factors when issuing cards. For example, a person living in a low-income area with large numbers of unemployment will receive a lower credit limit than a person with the same credit rating living in a ‘better’ neighborhood.

Banks use very sophisticated technology to determine a person’s reliability. They do not want to be left holding the bag, especially after the recent down turns in the economy and the new limitations on credit cards.

Since banks will be banned from going after college students, they must find a new group of susceptible individuals to catch in their web. College students were the perfect target with their tendency to overspend and stay loyal to the first credit card company who gave them a charge card. Banks will now go after the parents of college students, convincing them to co-sign for their child’s credit card and offer such features as parental control monitors.

A surge in secured credit cards is expected. A secured card will be popular with consumers who have bad credit due to bankruptcies or other reasons. This type of card can help them rebuild their credit. Secured cards do have fees associated with loading money but these are usually not substantial and less than interest fees on standard credit cards.

One of the largest fears consumers face is debit card fees. The lack of any fees, when used conservatively, makes debit cards popular with consumers. However, some banks are putting fees on debit cards. The first debit cards to feel this charge will be ones with rewards programs. It will most likely come in the form of an annual fee.

The new credit card act, once thought to ease consumer fear, gives Americans new reasons to worry about credit cards. The smart consumer must stay on top of the economic and financial news and make smart decisions to protect their credit in 2010.

FTC Wants Mortgage Relief Companies to Stop Charging Up Front Fees

The Federal Trade Commission has proposed some new rules directed at businesses referred to as Mortgage Relief companies. These companies offer to help consumers who are close to foreclosure. They promote assistance with mortgage modification which implies it is a government program.

The company first requires a fee be paid before any assistance is given. In many cases the fee is paid and the consumer gets nothing in return. It is a fraud and a scam that preys on desperate people and the Federal Trade Commission (FTC) wants them to stop. This is yet another scam that has been developed by taking advantage of current market conditions.

The FTC has proposed that mortgage relief companies be barred from charging upfront fees. The government agency wants these businesses to only be allowed to charge a fee after services have been provided. This would put a serious crimp in their ability to operate their frauds.

The condition of the economy has made ripe conditions for scammers and frauds. High unemployment and falling house prices have led to millions of consumers being threatened with the loss of their homes. The fact that consumers working directly with mortgage companies have been largely unsuccessful in getting their mortgages modified has made using an intermediary look beneficial. The mortgage relief company promises help to consumers stuck in a mire of paperwork or unable to even get the mortgage company to work with them.

The market conditions have led to a whole industry that promises consumers assistance with mortgage modifications and relief from foreclosure. Many of these companies simply take the fees paid and never provide any help to the consumer. The FTC has already brought 28 cases against mortgage relief companies for misrepresentation.

The misrepresentation involves implying the mortgage relief company works with the government and the modification programs such as the Making Home Affordable Program. They do not. In reality, it is con artists convincing consumers to give them fees for services they will never receive. It is a predatory practice. The mortgage relief company tells consumers to stop contacting their mortgage company so they don’t find out until it’s too late that they have been scammed.

The new rules would require the mortgage relief companies to reveal they are a for-profit business and what their true affiliations are with the mortgage companies and government agencies. The mortgage relief companies would also have to tell the consumer the full amount that will have to be paid and that there are no guarantees their mortgages will be modified. There are many other requirements also, and they are all designed to force the mortgage relief company to tell the truth about what it is offering.

The new rules can only apply to businesses that fall within the FTC’s jurisdiction. That largely encompasses all private businesses except for banks, thrifts, and federal credit unions. But these businesses are regulated by federal banking commissions and the Federal Reserve so there are still controls over fraudulent practices.

Subprime Credit Card Fees Increase As New Law Takes Effect

Though the credit card company would never tell you that the subprime cards are called fee-harvesting cards, the name is appropriate. These are the credit cards offered to people who have credit problems like low credit scores. They are loaded with fees of all types, and there is even a fee to get one of these cards. [Read more]

What the Credit CARD Law Does Not Do

There has been a lot of talk about the new Credit CARD Act that took effect on 22-February-2010. There were high hopes among consumers that the new law would rein in the excessive fees that make it difficult to pay off card balances when making minimum payments. Unfortunately the law only goes so far. For many the law is too lax because it does not limit the amount of interest rates and fees that can be added. It only limits when they can be changed.

The Consumers Union has expressed the opinion that the law is an important first step in establishing rules that limit the credit card company’s ability to use tricks to capture consumers in unmanageable debt. The new law addresses billing, disclosure, marketing to college students, and the infamous introductory offers that come in the mail.

There are things the new law does not address though. The credit card companies can still raise interest rates as high as they want and can add new fees too for opening, closing, or making account changes. They can still reduce account credit limits too without giving the card hold any warning.

A plethora of fees that will show up on consumer accounts are expected. In many cases the addition of new fees started months ago. The financial institutions have been crafty too. For example, Fifth Third Bank began charging $19 when a card is not used for 12 months. In other words, it is a fee for not charging. Banks are charging for printed statements, cash advances, minimum account charges, paying online and more.

The Credit CARD law clearly does not limit fees and that means the credit card companies are free to replace as much of the revenue lost through new regulations as desired with new fees. In the opinion of the Center for Responsible Lending the card issuers are able to do pretty much what they want still.

What else does the new law not do? It does not prevent credit card companies from raising interest rates on new purchases. Though interest rates cannot go up on purchases already mad, the new rates can be as high as the company wants to charge. For example, First Premier Bank offered a credit card with a 79.9 percent interest rate. You have to speculate as to the type of customer who would accept such an exorbitant rate.

The law also does not stop the credit card companies from lowering credit card balances which can lower a credit score. The Credit CARD Act does not apply to business credit cards. That means many small businesses will still face the same problems as before when working with the lenders. The law does instruct the Federal Reserve to study how businesses use credit cards.

The next step according to consumer advocates is to extend the law to include limits on fees and interest rates. Though that could happen, it probably will not happen anytime soon. The credit card companies are already expected to lose revenues during a time when the economy is struggling to recover. It is unlikely Congress will address in the near future what the Credit CARD Act does not do.

U.S. Homeowners Still Trying to Tread Mortgage Waters

Much of the U.S. recovery relies on the restoration of normal operations in the housing industry. The numbers indicate that normalization could still be a long way off though. One out of every 5 homeowners is living in a house that is called “underwater”. [Read more]

Go One Place for Free Credit Reports

There are plenty of advertisements on television warning consumers about the problem of identity theft. There is one with singing pirates or singing medieval men that make identity theft almost sound like fun. One identity theft commercial has a policeman who explains he had his identity stolen. The implication is that if a policeman can become a victim then anyone can become a victim. [Read more]

Consumers Prepare for Credit CARD Act

Consumers have been inundated with news about the passage and implementation of the Credit CARD Act. CARD stands for Credit Card Accountability, Responsibility and Disclosure. [Read more]

Union Workers Target of Credit Card Scam

Credit card scams appear every day and many of them are right on the border between illegal and legal. In other words, credit card offers may be technically legal but are deceptive because of how information is presented to the consumer. Recently it was union workers in Ohio who were targeted by a credit card scam. [Read more]

Overcoming Destroyed Credit History Focus of Consumers

The consumer credit market all but came to a standstill for months over the last year. But even worse is the fact that many consumers watched their credit histories destroyed after years of timely payments. Rising foreclosures, and credit card and loan delinquencies, have created many black marks on credit reports that will haunt consumers for many years. [Read more]

New Ways To Improve Your Credit Score

You know that your credit score impacts your life. It determines how much you will pay for loans and if you will even be able to get one. It may even determine if you are hired for a job that you apply for. [Read more]

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