Credit and Prepaid Card News
The latest news on the credit card and prepaid card industry from the Center for Responsible Lending.
- Debt Settlement Industry in Flux as New Rules Start
Fox Business 11 Jan 2011
Consumer advocates are outraged that borrowers are still being tricked into signing up for debt settlement services, despite federal rules that took effect more than two months ago with the intent of curbing shady practices. The industry has changed since the legislation went into place, but advocates say the changes has not necessarily been for the best and has not come quickly enough. Debt settlers generally have responded to the new regulations in one of three ways: by going out of business, changing their business models to comply with the rules and stop collecting upfront fees for debt negotiations, or changing their marketing tactics in an effort to circumvent aspects of the rule that apply to telemarketing. As of Oct. 31, 2010, the companies are no longer allowed to charge fees until after they have negotiated settlements with credit card companies and other creditors. Restrictions are also placed on the amount of fees that can be charged and the kind of claims that settlement firms can make in their advertising. The industry has grown from nearly a dozen players in the early 2000s to about 100 as of 2006, and only about a quarter of clients who remain in debt settlement programs for three years actually complete their debt repayment plans. The Association of Settlement Companies, an industry trade group, says it is as interested as consumer advocates in weeding out the companies that are doing business poorly, but abuses still continue. A coalition of consumer groups sent a letter in December 2010 urging the Federal Trade Commission to increase enforcement of its rules. Though the FTC pledged to do so, consumer groups say the agency is not adequately staffed to truly police the industry. Since telemarketing has been banned, consumers have seen an increase in spam e-mails touting their qualifications for the services. The companies have also increased their usage of radio advertising, which suggests to many that a more comprehensive federal law is needed.
- Credit Cards Still Use Soon-to-be-Banned Policies
Associated Press 28 Oct 2009
An analysis conducted by the Pew Charitable Trusts' Safe Credit Cards Project concludes that the nation's 12 biggest credit card issuers are still engaging in practices that will be considered illegal once new restrictions kick in early next year. The organization examined nearly 400 cards offered by the banks that account for 90 percent of outstanding credit in this country. What it found is that most of them continue to hike interest rates on outstanding balances, trigger penalty interest rates with just one or two late payments or over-the-limit transactions, and apply payments to the lowest-interest portion of balances first -- all policies that are outlawed under the Credit Card Accountability, Responsibility and Disclosure (CARD) Act signed by President Obama in May. Additionally, penalty interest rates have climbed, as have the lowest interest rates offered to new customers; and issuers have added fees -- or raised existing ones -- for balance transfers, cash advances, overdraft protection, and other services. "It's clear that until the law takes effect, or Congress accelerates the implementation date of the law, these practices are going to continue to be out there," declares study co-author Nick Bourke. "Once it takes full effect next year, it's going to stop a lot of unfair and deceptive practices." If consumer advocates have it their way, the crackdown will start sooner. Responding to ongoing complaints from the public, Congress is considering moving the effective date of the CARD Act to Dec. 1 instead of waiting until February to fully implement the law.