New protections for credit card customers are here, but be ready for loopholes
Beginning tomorrow, some of the more outrageous practices of credit card issuers will be outlawed. But, just like a bully on a playground who doesn’t punch when the teacher is watching, lenders will find ways to continue pummeling consumers.
The Credit Card Accountability, Responsibility and Disclosure Act of 2009 established sweeping changes intended to help curtail certain industry practices, reduce unfair fees, and rein in huge interest rate increases. Under the new law, issuers also are required to disclose how long it will take customers to eliminate their debt if they choose to make only minimum monthly payments.
“This law is putting the consumer in a stronger position. It’s not absolving them from the requirement that they pay their bills, but it levels the playing field quite a bit,’’ said Austan Goolsbee, a member of the president’s Council of Economic Advisers.
However, as with any law, loopholes do exist. Here are just a few:
■ Issuers cannot raise interest rates on existing balances.
The loophole: Your company can still raise the rate for new charges under certain conditions, such as if the card carries a variable indexed interest rate, or a rate promotion ends. Surveys have found that many issuers boosted interest rates on purchases and cash advances. Even customers with excellent payment histories have seen their rates jump. To learn more, go to www.federalreserve.gov and click on the link
Companies are allowed to increase the interest rate on new charges if you are more than 60 days late. In the past, you might have been late just one month before being hit with a penalty rate.
Fair enough, if you are late paying your bill, the company should have the right to penalize you. However, there is no federal cap on the interest rate the card company can charge.
■ Issuers cannot charge over-the-limit fees unless a consumer agrees to have such transactions approved.
The loophole: I’ve already heard from one reader who said that when he was contacted by his credit card company, he felt pressured to opt in. Just opt out. The companies may try to convince you that all kinds of dire things may happen if you can’t spend over your credit limit, but the concern is for their bottom line, not yours. Just don’t do it. If you do opt in, your credit card company can impose only one fee per billing cycle. You also can revoke your opt-in at any time.
■ If your company requires you to pay fees (such as an annual fee), they cannot total more than 25 percent of the initial credit limit. For example, if your initial credit limit is $500, the fees cannot be more than $125.
The loophole: This limit does not apply to penalty fees.
The CARD Act has made things better for credit card holders, but it can’t anticipate new tactics by the companies. So be ready to fight.
Michelle Singletary is a columnist for The Washington Post. She can be reached at singletarym@washpost.com. 
