Credit Card Companies Under More Scrutiny

[Aug 15, 2007.]

This summer, credit card companies are under increasing scrutiny.

For instance, the Federal Reserve Board wants companies to make information about their credit rates and fees more user-friendly. The Fed also wants credit card issuers to give consumers more notice when they're about to raise rates. Currently, issuers give consumers 15 days' notice. The Federal Reserve Board wants that expanded to 45 days.

Credit card companies are responding by saying that they support improved disclosure practices. However, they're balking at restrictions on raising fees or hiking rates.

Credit card issuers can make a tremendous amount of money through extraneous fees. For instance, they may charge a customer a $29 late payment fee, then another $29 for going over the credit limit. Some consumers are responding to the heightened fees by canceling their cards.

Meanwhile, credit card industry representatives note that many consumers are enjoying lower interest rates on cards than they did before 1990. At that time, the fixed rate was set at about 20%. In fact, as many as three-fourths of American households now possess charge cards with lower interest rates.

Meanwhile, bills have been introduced in the U.S. House and Senate to stop universal default with credit cards. Under the concept of universal default, a credit card company can hike your interest rate even if you're paying your credit card bill on time if you've paid your electric bill or some other bill late.

In addition, consumer watchdog groups are objecting to the fact that credit card companies are hiking interest rates based on consumer credit reports. These consumer advocates say that such practices are unfair because many reports contain mistakes—mistakes consumers may be unaware of.

Even if Congress doesn't take action, consumers can protect themselves by obtaining a free copy of their credit report each year. Financial experts say credit card customers should also strive to stay under their limits and pay their bills on time to avoid unnecessary charges.

Julie Ann Amos
August 15th 2007

Recent News

• Wall Street Hit By Housing Slump
  There are new fears that the housing crisis that has been gripping the country could have reverberations on Wall Street, the symbol of America's economic health and vitality.[13th August 2007]


• Housing Slump Likely to Continue
  Financial forecasters say the current housing slump is likely to continue in the near term.[13th August 2007]


• Consumers Urged to Pay Heed to Their Credit Scores This Summer
  This summer, financial experts are warning consumers that they need to pay particular attention to their credit scores—before it's too late.[13th August 2007]


• Consumers Searching for Ways to Rebuild Their Credit
  This summer, a number of American consumers are looking for ways to rebuild their credit history. Such a goal is important, considering the fact that a less-than-stellar credit rating can cost you thousands of dollars in interest and life insurance costs. [7th August 2007]


• Wells Fargo Posts Rise in Profit
  Wells Fargo, one of the nation's leading providers of home loans, saw its second quarter profits rise 9%, despite the difficulty that some consumers are having paying their mortgages this year.[7th August 2007]


• Debit Card Use Can Yield Some Unwelcome Surprises
  Debit card use has exploded in recent years, with consumers turning to the cards as a convenient alternative to writing checks. [7th August 2007]


• Consumers Question Credit Report Offers
  Some American consumers this summer are questioning "deals" offering copies of credit reports to those who pay for special services. While the practice is legal, experts say it may not be the best idea for a consumer's bottom line.[6th August 2007]


• Citigroup Sees Rise in Second Quarter Profits
  Citigroup Inc. is reporting an 18 percent jump in its second-quarter profit.[6th August 2007]