Credit card issuers have dropped many policies that lawmakers deemed unfair and barred under the CARD Act, but some new practices that could put consumers at risk are increasing, according to a report from the Pew Health Group's Safe Credit Cards Project.
"Most of the news is good, but we are seeing the rise of new harmful behavior," Shelley A. Hearne, the Pew Health Group managing director, said in a press release last week. Pew gathered data in March from the 12 largest U.S. banks and the 12 largest credit unions, which together have a total of 450 credit card products.
Issuers have stopped raising cardholders' interest rates for infractions such as being one day late with a payment; typically, they now increase a cardholder's rates only when a payment is more than 60 days late.
If cardholders make six on-time payments after their rates were increased due to late payments, some issuers will restore the original rates, though Pew found that few disclose this to consumers in cardholder agreements.
Also, within the past year, issuers increasingly have failed to disclose the actual penalty interest rate to be imposed on consumers whose payments are late, Pew found. Penalty rates continue to be two to three times higher than base advertised rates, "making it difficult or impossible for a struggling cardholder to resume on-time payment," the study said.
Issuers also are giving cardholders 45 days' notice of pending interest rate changes and are applying payments first to balances with the highest interest rates, in accordance with the new law.
Most issuers have abandoned overlimit fees in the past year; about 23% of all bank-issued cards Pew examined had an overlimit fee, down from 80% last July. Nineteen percent of credit unions impose overlimit fees, down from 89%.
Mandatory arbitration clauses limiting cardholders' rights to settle disputes in court also have all but disappeared. Such arbitration clauses existed in 10% of cardholder agreements, compared with 68% a year earlier, Pew found.
New card fees, which observers had predicted would be spurred by the new law, largely have failed to appear. The prevalence of credit cards with annual fees fell to 14% in March, from 15% last July, though the median annual fee rose, to $59, from $50, the study said. Credit union-issued credit cards' median annual fees rose to $25, from $15, during the same period, Pew said. Annual fees ranged from $29 to $450 at banks and from $15 to $50 at credit unions.
Pew said advertised interest rates on credit cards kept rising. (The CARD Act does restrict new credit card account interest rates.) Though rates vary widely, the median highest advertised interest rate on credit cards in March was 20.99%, up 300 basis points from July 2009.
The CARD Act included several protections for young adults, including requiring co-signers for applicants under 21, but Pew found only one card that mentions that rule. "These new protections have not been widely reflected in card issuers' terms and conditions," Pew said.