Archive for the ‘fees’ Category
Tuesday, August 10th, 2010
As you may know, last year Congress passed a law called the Credit Card Accountability Responsibility and Disclosure Act of 2009. This law, nicknamed the CARD Act of 2009, was designed to regulate a variety of unpopular credit card tactics, such as interest rate increases without notice, inactivity fees and unfair interest calculations.
According to credit card industry analysts, the CARD Act of 2009 will eliminate over $390 million in fees for credit card issuers. Not surprisingly, the credit card companies do not intend to walk away from this fee income. For every fee and penalty eliminated by the CARD Act, credit card issuers are finding replacements. For example the annual fee for many cards has been increased, sometimes dramatically. Card issuers are also sending corporate card applications (called "professional cards") to consumers. Corporate cards are not included in the CARD Act.
The Wall Street Journal recently ran a story explaining how the credit card companies intends to recoup their lost fee income. The bottom line: the CARD Act of 2009 will eliminate some consumer-unfriendly tactics used by the credit card companies, but it will trigger an equal number of new consumer-unfriendly tactics. Caveat Emptor.
Posted in CARD Act of 2009, Congress, Consumer Protection, Credit, Disclosure, Law, a, accountability, act, act the, and, applications, called, card, corporate, credit card company tactics, credit card fees, dramatically , fees, inactivity, included, issuers, issuers , journal, notice, passed, responsibility, sending, street, tactics, the, unfair, unpopular, wall, year | Comments Off
Tuesday, June 22nd, 2010
Certain provisions of the Credit Card Accountability and Responsibility and Disclosure Act (Credit CARD Act) that President Obama signed into law last year will go into effect on August 22, 2010. As that date approaches, the Federal Reserve has been announcing adjustments and modifications to prepare consumers.
A few such adjustments were announced this week. The final rule issued by the Fed (which amends Regulation Z, also known as the Truth in Lending Act) includes these provisions:
- Credit card issuers cannot charge more than $25 for late payments or other violations of an account’s terms unless a user has incurred prior fines or a higher fee constitutes a reasonable percentage of the transaction that caused the violation.
- Card issuers cannot charge fines or fees that exceed a card user’s payment. For transactions less than $25, the fee can equal up to the purchase amount.
- Issuers are no longer permitted to charge “inactivity” fees to penalize customers who do not use their accounts for a certain amount of time.
- Issuers can no longer charge multiple fines or fees for a single violation of the terms of the account (such as a late payment).
- Issuers that have increased rates since the beginning of 2009 must reevaluate whether the reason for the rate increase (such as a drop in credit score) still exists, and, if the reason no longer exists, to lower the interest rate.
A detailed, step-by-step look at the new regulations can be found at the Federal Reserve’s consumers page.
Other Changes to Note
The Fed also offers explanations of those changes that took effect on February 22 of this year. If you haven’t already noticed, these changes include:
- Advance notice of fee or interest rate increases: Card issuers are required to inform consumers at least 45 days in advance of such changes.
- Length of time to pay off a balance: This is a handy feature, since it clearly states how long it would take to pay off your debt making only the minimum payment. Your statement should also identify how much you need to pay each month in order to pay off your debt in three years.
- Application of increased interest rates: Should your credit card issuer increase your interest rate, it cannot apply the new rate to existing debt; only new purchases can be charged at that rate.
For a full examination of the changes, be sure to check out the Fed’s site. How are these changes affecting you? Leave your thoughts in the comments below.
Posted in Credit Cards, Credit and Bankruptcy, credit CARD act, fees, interest | Comments Off
Saturday, June 19th, 2010
In response to consumer complaints about ballooning overdraft fees, the Federal Reserve will soon pass new rules aimed at stopping banks’ misleading overdraft tactics. According to the Los Angeles Times, banks will no longer be allowed to automatically enroll customers in overdraft protection plans for their bank accounts.
At first glance, this seems silly—why wouldn’t consumers want overdraft protection? Well, such “protection” means that banks will allow you to make purchases with a debit card beyond your checking account’s limits, thus allowing your balance to go negative. The bank then charges an overdraft fee, which reportedly can reach as high as $39 per overdraft.
Since many consumers assume that using a debit card prevents them from going over their account limits, this often comes as a surprise. In addition, many consumers would prefer their purchases to be turned down for lack of funds, rather than face overdraft fees. However, automatic overdraft plans do not allow consumers this option.
In defense to such criticism, banks argue that overdraft protection saves consumers the embarrassment of having their cards turned down. Further, it allows consumers to make emergency purchases even if their balance is negative. While some consumers may appreciate these benefits, many account holders are upset with the current rules that automatically enroll consumers in overdraft protection plans.
New Rules
Starting August 1, banks will not be able to automatically enroll customers in overdraft plans. Instead, account holders will be asked to “opt-in” to overdraft protection if they want to avoid having purchases denied due to insufficient funds.
As Nessa Faddis, a spokeswoman for the American Bankers Association explains, “It’s a general opt-in. If you don’t do it, you could have a debit purchase denied.”
While it comes as no surprise that bankers enjoy the fees collected through their overdraft plans, some consumers may prefer to have their debit purchases denied, rather than be charged high fees. The new Federal Reserve rule intends to give consumers this choice.
Exceptions
As with many banking regulations, there are exceptions to the new overdraft rules:
- Banks can still allow “regular” payments and debits to be made, even if they push you past your account balance. Such payments might include automatic withdrawals for services like a gym membership. In addition, banks can still automatically charge fees for these “automatic” overdrafts.
- Banks can also continue their practice of “reordering” your purchases, so that the largest purchases are tallied first. By depleting your account with big purchases first, banks increase the odds that subsequent smaller purchases may trigger several overdraft fees. Remember, each purchase you make while in the red triggers a separate overdraft fee.
Additional Resources
To learn more about the new overdraft rules, visit the Federal Reserve's website.
Posted in Bankruptcy and Predatory Lending, Banks, Loans, fees, overdraft | Comments Off
