"The CARD Act has been very successful," said
Pamela Banks, senior policy counsel for financial services at Consumers Union.
"But the problem is, when you fix some things, other issues crop up."
Consumers Union is one of the groups that filed official
appeals for action with regulators. The bulging comment file also contains
broadsides from the National Consumer Law Center, the Center for Responsible
Lending and the Pew Charitable Trusts.
Regulators at the Consumer Financial Protection Bureau collected
the comments earlier this year about the post-CARD Act environment. The CFPB plans
to issue a study in coming months that will look at the law's impact on the
availability of credit, and at how card issuers' practices are affecting
Sounding off about
Several groups pointed at deferred interest cards as the most
dangerous trap lying in wait for unwary borrowers. Known as a way to buy major
items such as appliances, the delayed interest deals are also becoming popular
with some doctors and dentists as a way for their patients to finance expensive
"People use delayed interest as a way to afford a
washing machine or whatever they need," Banks said. "But these credit
card contracts are very complicated."
One unwary Denver resident named Janine told Consumers Union
that she and her spouse wound up paying more than $1,000 in surprise interest
on a deferred deal. Having made their first payment in October, the couple
figured that the final payment on the one-year deferral would come the
folloing October -- but that was a month late. As a result, they were charged
the full year of accrued interest, which took a few more months of payments to erase.
"There was never any statement of final balance due by "x" date
to avoid interest charges," she was quoted as saying in the regulatory
The cost of credit
It isn't deferred interest that bothered Edward Jankauskas,
a retired postal worker in Philadelphia, just the high level of interest rates in a
"As a consumer and user of credit cards, it still
baffles me why credit card companies charge as much as 29.9 percent interest,
while the prime rate has been at 3.25 percent and the federal funds rate at
0.25 percent," he wrote in a January filing.
Blame the CARD Act for boosting rates, says the American
Bankers Association. Card rates are up about 0.73 of a percentage point since
late 2008, the group said, even while rates for other consumer credit have plunged.
And fewer subprime borrowers are able to get cards at any rate, driving them
into the arms of payday lenders and other higher-cost loans, according to the
"There was a great contraction in credit," said Nessa Feddis,
senior counsel at the ABA. "The fact that it has not recovered with the
economy suggests it is related to the CARD Act."
Consumer groups counter
that the rates consumers actually pay on their card balances is about the same
as before the CARD Act was enacted, when you factor out the effects of the
recession. What's new is that advertised rates, especially for subprime cards,
have gone up because lenders are no longer able to keep them artificially low
by piling on fees instead. Even an increase in the overall cost of credit isn't
necessarily harmful, the NCLC argues, if it has stopped practices that soaked
subprime cardholders in order to subsidize the perks enjoyed by others.
The road ahead
No one is predicting that new protections are a slam dunk.
But neither is it likely to see the CARD Act's protections rolled back or
"The (banking) industry is not trying to change the
CARD Act," said Lauren Saunders, managing attorney of the NCLC's
Washington, D.C., office. Rather, card issuers continue to make the argument
that further regulation will restrict the availability of credit and raise the
costs, she said.
The biggest barrier to new protections may be the consumer
protection bureau's own busy schedule. With action pending on payday loans and
examinations of debt collectors under way, resources for a new push on credit
card protections could be thin. The CARD Act mandates that the agency produce
the report, but no rulemaking is required. "There are still credit card
issues out there," Saunders said. "They've just got a lot of stuff
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