Credit and Prepaid Card News
The latest news on the credit card and prepaid card industry from the Center for Responsible Lending.
- Upper West Side Joins Boca in Most Credit Card Complaints
Bloomberg 27 Mar 2013
Since it began gathering consumer gripes about credit cards in July 2011, the Consumer Financial Protection Bureau has received the highest volume of grievances from well-off communities in New York and Florida, based on an analysis of agency data. Of the top four zip codes contributing to the more than 18,500 complaints published as of March 18, two are on Manhattan's Upper West Side and two are in south Florida...
- Expiration Dates Fuzzy on Old Card Debt
Fox Business 25 Mar 2013
The credit card debt that Americans built up over the recession is gradually eroding and becoming legally off-limits to collectors, although it can be difficult to figure out when an individual obligation has expired...
- ‘Pre-Account Opening’ Fees Is Where Credit Card Reform Failed
eCredit Daily 25 Mar 2013
Although the 2009 Credit CARD Act added many protections for consumers, the result of one lawsuit allows card issuers to charge a practically unlimited fee for opening an account. First Premier Bank challenged the Federal Reserve and U.S. lawmakers in court over one provision of the reform law -- and won...
- CFPB Focuses on Consumer Choice -- Or Lack Thereof
American Banker 21 Mar 2013
Last month, Consumer Financial Protection Bureau (CFPB) director Richard Cordray proposed a new, unified way of thinking about several of the agency's biggest issues. He pointed out that U.S. consumers do not get to choose the company that services their mortgage, the collection firms for their debts, or the entity that compiles their credit files...
- The Young and the Creditless: Young Adults Eschew Credit Cards
Chicago Tribune 20 Mar 2013
A growing number of young adults aged 18 to 24 balk at using credit cards. A Sallie Mae and Ipsos Public Affairs survey found that 39 percent of undergraduates ages 18 to 24 owned a credit card in 2012, compared to 49 percent in 2010...
- Credit Card Users Smarten Up
U.S. News & World Report 13 Mar 2013
Americans are becoming more thrifty, according to new data from rating agency Fitch. The share of delinquent accounts is at the lowest level since 1991, with more credit card borrowers paying off their balance in full each month and fewer carrying a balance. The typical credit card charge-off rate peaked at 11.4 percent in early 2010 but began to fall abruptly by 2011. The Federal Reserve recently reported that the total number of credit card accounts fell from nearly 500 million in 2008 to 380 million now. Two area where Americans are not deleveraging are student loans and federal debt. Total student loan balances are nearly $1 trillion, with default rates exceeding any other type of debt. Americans' savings rates also continue to decline.
- Bill Would Allow Consumers to Get Free Credit Score When Receiving Free Credit Reports
Consumerist 06 Mar 2013
Sen. Bernie Sanders of Vermont and Rep. Steve Cohen of Tennessee have introduced The Fair Access to Credit Scores Act of 2013, which would amend the Fair Credit Reporting Act. The bill would require that the three major credit bureaus also include a current credit score when they provide a customer with a free credit report. Currently, U.S. consumers can check each credit report from TransUnion, Equifax, and Experian once a year for free through AnnualCreditReport.com; but they may have to pay for the actual credit score. Sanders’ office says that one of the motivations behind the bill is to fight back against “free score” schemes that provide consumers with FICO scores -- but only if they sign up for costly subscription-based credit monitoring services. It also aims to provide scores that are similar or the same as the scores that lenders see -- not the "educational" scores that borrowers can purchase and that often differ markedly from those sold to lenders. "Knowing your credit score is essential to managing your finances," states Pamela Banks of Consumers Union. "Your scores have a huge impact on your life, but you typically have to pay for them, and the scores you buy may not even be the ones your lenders use. This bill would help consumers get the credit scores they need, and it would take some of the mystery out of the credit reporting industry."
- Card Complaints Zing Companies
Fox Business 05 Mar 2013
Out of seven major U.S. credit card issuers, Capital One drew the greatest number of complaints from its customers in 2012, according to an analysis of newly public complaint figures released by the Consumer Financial Protection Bureau. Creditcards.com found that American Express generated the fewest complaints by purchase volume of the seven companies, but it also was least generous in terms of credits and other kinds of payback after receiving a gripe. The agency's detailed records provide a first-ever look at disputes between card issuers and their customers -- with billing disputes, interest rate problems, and credit report complaints coming in at the top -- as well as which companies are likely to pay back a customer who experiences a problem. A separate poll by J.D. Power, meanwhile, calculated that 11 percent of all account holders encountered some kind of issue with their credit card last year, suggesting that the 15,000 or so grievances submitted to the CFPB in 2012 is a strong underrepresentation of the actual level of customer dissatisfaction. However, J.D. Power notes that the 11 percent complaint rate is down from 18 percent in 2009, before the Credit Card Act took effect in 2010.
- Millennials May Take Credit Card Debt to the Grave
NASDAQ 27 Feb 2013
U.S. consumers born in the early 1980s are charging more on their credit cards and taking longer to pay off their balances than previous generations, according to researchers from Ohio State University. Those born between 1980-1984, known as Millennials, could owe $5,689 more in credit card debt than those born between 1950-1954. Data also suggest that Millennials may continue to charge their purchases until age 70; some could even die while still owing money on their cards. The slow payoff of the debt is a significant part of the problem. Consumers born from 1980-1984 have payoff rates that are 24 percent lower than their parents and 77 percent lower than their grandparents. Making 2 percent minimum payments on a $1,000 balance at 19 percent interest would take eight years and four months to pay off the card, but it would take one year and nine months if the minimum payment was increased to 5.8 percent.
- 1 in 4 Americans Have More Credit Card Debt Than Savings
Today 25 Feb 2013
Nearly a quarter of Americans have more credit card debt than emergency savings, according to an annual survey by Bankrate.com. The research also found that only about 55 percent of Americans have more emergency savings than credit card debt. Sixteen percent had none of each; the rest did not know or declined to say. The poll results are not much different from those found in 2011 and 2012. Greg McBride, senior financial analyst with Bankrate.com, points out that wages have been generally stagnant in recent years even as expenses have increased. Revolving debt did fall between 2008 and 2010, according to the Federal Reserve, but has since held relatively steady at about $850 billion. The Bankrate.com survey found that four in 10 people were feeling less comfortable about their savings levels than a year ago, and only 14 percent were feeling better.
- Why College Students Should Only Have One Credit Card
Fox Business 25 Feb 2013
While consumers may be tempted to sign up for an in-store credit card or a rewards card, financial experts say doing so could be counterproductive to a good credit history. Ben Woolsey, director of marketing and consumer research for CreditCards.com, says that "even if you don’t use the credit, just having it available to you can make you look risky to future lenders.” College students, in particular, do not need more than one credit card. A 2009 survey by Sallie Mae found that 91 percent of undergraduates have at least one credit card, up from 76 percent in 2004. By applying for a new credit card, consumers launch a hard inquiry with the lender, which can hurt their credit score. Under the CARD Act of 2009, students under age 21 cannot apply for credit cards without proven income or a co-signer on the account. Students and graduates can follow steps to cancel a card without damaging their credit history. First, consumers should keep the credit account they have had the longest. Those who are looking to take out a loan or apply for a new card should not close an account. However, if students are struggling to keep up with a high interest rate or annual fees, it may be better to close that account. Balances should be brought down to zero before consumers request that the account be closed. Borrowers can request that an account be closed by email, phone, or mail but should call the credit card company and confirm that the account is to be closed. This can take weeks or even months.
- Younger Consumers' Tendency to Use Debit Cards Could Drive Mobile Payments
BankCreditNews.com 20 Feb 2013
Younger U.S. consumers are abandoning credit cards in favor of debit cards, according to a recent report from Mercator Advisory Group. This trend may drive growth in the mobile payments industry. Fifty-nine percent of Americans age 18 to 35 hold credit cards compared to 70 percent of seniors. While only 12 percent of seniors reported using debit cards, 36 percent of young adults did, Mobile Marketing Watch states.
- More Baby Boomers Facing Credit-Card Quandary
NBC News 19 Feb 2013
Credit-card debt has become a significant problem among Americans over age 50, according to new figures from policy research organization Demos. Low- and middle-income households of older Americans who have owed money on credit cards for at least three months have an average of $8,278 in debt. The average is $6,258 for Americans under 50. Many older workers, who should be saving for retirement, use credit cards for everyday expenses, including groceries, utilities, and prescription drugs. This could lead to serious financial hardships for the 79-million-member Boomer generation, especially if the federal government trims Social Security benefits or raises the age of benefit eligibility. Many Americans over age 50 do have financial resources, but their assets are difficult to tap, such as 401(k) accounts that have early withdrawal penalties or significant amounts of wealth invested in homes.
- TransUnion: Late Payment Rate on US Credit Cards Rose in 4Q Amid Ramped Up Holiday Spending
Minneapolis Star Tribune 19 Feb 2013
In the fourth quarter each year, ramped-up holiday season spending typically keeps numerous borrowers from making timely payments on their credit cards. This past year's October-through-November period was no exception. According to TransUnion, the rate of credit card payments at least 90 days overdue climbed from 0.78 percent the fourth quarter of 2011 to 0.85 percent -- an increase of about 9 percent. In addition, the rate rose 13 percent from the third quarter when it was 0.75 percent. Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit, confirms that much of the growth in late payments on credit cards in the October-December period is due to increased spending for the holiday season.
- Two More States Mulling Bans on Credit Card Surcharges
American Banker 11 Feb 2013
Missouri and Utah are the latest states to consider barring merchants from imposing surcharges on customers who use credit cards. Bills filed late this week by lawmakers in those two states mean that nine states are now mulling laws that would ban the surcharges, in addition to 10 states that already have bans on the books. The legislation comes in response to new rules that allow surcharging on Visa and MasterCard transactions. The rules, which took effect Jan. 27, are part of a proposed settlement that the two networks and card-issuing banks reached last year with suing merchants.
- Seven States Eye Bans on Credit-Card Surcharges
American Banker 08 Feb 2013
States are pushing back on retailers' new power to levy a surcharge on consumer purchases made with credit cards. That authority was conferred as part of a 2012 settlement with Visa and MasterCard over so-called swipe fees that merchants pay the card companies to process transactions. For customers, that could mean surcharges of up to 4 percent when they pay with plastic. While consumers in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas are shielded from the new fee by respective state laws prohibiting such fees, seven more jurisdictions have introduced or are planning to introduce similar bans. Proposals are in play in Illinois, Hawaii, Rhode Island, and New Jersey and are being prepared for rollout in Pennsylvania, West Virginia, and Vermont. Lawmakers in those states say the bans are needed to protect the public, but observers say legislative action may not even be necessary since most retailers appear to have no plans to add the surcharge.
- N.J. Restricts Credit-Card Company Access to Students
Philly.com 08 Feb 2013
New Jersey Gov. Chris Christie on Feb. 7 signed legislation that bars credit card issuers from launching marketing campaigns on the grounds of the state's public colleges. Under the law, institutions of higher education may not allow "direct merchandising" from card companies, including "interpersonal contact or through the use of displays." The bipartisan law, first proposed in 1998, passed on a nearly unanimous vote.
- Consumers Leery of Financial Regulations When Confronted With Costs
ConsumerAffairs.com (CA) 07 Feb 2013
It is almost the end of the Consumer Financial Protection Bureau's 60-day comment period for gathering consumer feedback on the 2009 CARD act. The public has until Feb. 19, 2013, to offer input on the law. The CFPB is attempting to determine how the measure has impacted consumers and the credit card industry. Earlier research by the bureau found that the CARD Act largely deterred the practice of raising interest rates on existing accounts and that it had substantially reduced consumer late fees and over-limit fees. A CreditDonkey.com survey of consumers recently tried to gauge support for potential regulations, especially for pre-paid cards. Among the responders, 83.6 percent supported the idea of requiring prepaid debit card issuers to limit consumer liability for unauthorized transactions, similar to protections provided for credit cards; but support fell to 51 percent when participants were informed that such regulation could result in higher fees. More than half of survey respondents supported a proposed rule that would make it easier for non-working spouses and partners to obtain credit cards, but only 30 percent said they would also accept higher fees or interest rates in exchange for that rule.
- Sacco, Prieto Sponsor Bills to Prohibit Surcharges for Using Credit Cards to Pay
Jersey Journal (NJ) 06 Feb 2013
New Jersey state Sen. Nicholas Sacco (D-North Bergen) and state Assemblyman Vincent Prieto (D-Secaucus) have introduced bills in their respective chambers to ban merchants from tacking a surcharge onto credit card purchases. MasterCard and Visa sanctioned the new fees, equal to 1 percent to 4 percent of the transaction amount, as part of a settlement over interchange fees that retailers must pay them. The agreement applies nationwide, except for in 10 states where credit card fees are explicitly prohibited. Sacco and Prieto would like to add New Jersey to those ranks, with legislation that would fine retailers $10,000 and $20,000 for their first and second offenses, respectively, and hand down cease-and-desist orders from the attorney general upon subsequent violation. Sacco's bill successfully moved out of the state Senate Commerce Committee on Feb. 5, while the state Assembly bill will go before committee on Feb. 7.