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Beware of Questionable Credit Card Practices

Written by: Kristy Welsh

Last Updated: July 27, 2017

After the economic meltdown of 2008, the government has stepped in to try to regulate and oversee the business tactics of banks, mortgage companies, credit card companies, and debt collectors. This massive overtaking by the government resulted in the passing of the "Dodd-Frank Wall Street Reform Act," which then spawned the Consumer Financial Protection Bureau in July of 2011. The CFPB was formed to regulate consumer protection with regard to financial products and services offered in the United States.

Prior to these regulations, card companies were "loading their credit cards with tricks and traps so they can maximize income from interest rates and fees," according to Elizabeth Warren, a Harvard University law professor who was responsible for the formation of the CFPB.

The Federal Reserve Board has taken notice and requires issuers to disclose clearer information about rates and fees and 45 days (as opposed to 15 days) notice before they can lawfully raise rates. Congress has also held hearings to investigate credit card business practices, and many large credit card companies, such as American Express, have been fined for illegal tactics. American Express agreed to pay $85 million in refunds to 250,000 cardholders because of unscrupulous marketing incentives.

Examples of Questionable Practices

In general, most consumers will argue that credit card disclosures are so confusing and so many penalty rates and fees may apply, it's extremely difficult to know how to avoid them. There are so many different credit cards to choose from, but only a bare minimum of the terms are likely to be reviewed by the average consumer. And, most disclosure forms are typically written in a language only a lawyer can interpret. But there are some questionable practices that you should be aware of, and by law these must be disclosed/defined in your credit card agreement, so read your terms and conditions carefully.

Some Examples:

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How to Control Credit Card Costs and Questionable Billing Practices

You need to complain! If you've been hit with a high fee because your payment was a day late, call and ask for it to be waived. If you are a customer with a good payment history there is a good chance they will agree to disregard the fee.

Be sure to review your card terms and conditions thoroughly; if they contain many of the questionable features, switch to a more consumer friendly card. If you need to submit a complaint to the CFPB, here is more information on how to go about it.

Support legislation proposed by Congress or your State which would restrain some of these questionable policies and restrict/cap fees and rates charged by card-issuers. The recently passes Credit CARD (Card Accountability, Responsibility and Disclosure) Act provides the following protection to consumers:

Did Credit Card Companies Respond to the Complaints?

The Industry's stance seems to be that it would welcome better disclosure, but it opposes curbs on it's ability to raise fees or rates or change policies.

Several major credit-card companies announced some policy changes. Citi Card said it would no longer raise interest rates for customers who pay their bills on time, but make a late payment to another creditor (i.e. eliminating universal default). They also announced that they would not increase interest rates or fees on a customers credit card until the card expires and a new card is issued - unless the customer pays late, exceeds his credit limit, or pays with a bad check. If the card's interest rate is linked to the prime rate, it will change only when this moves.

Chase Bank also announced it is dropping it's two-cycle billing practices, along with easing up on some of the fees it charges customers who exceed their credit limits.

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