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."
- Capital One to Refund $150 Million to Credit Card Customers
Los Angeles Times 18 Jul 2012
In the Consumer Financial Protection Bureau's first major enforcement action since the agency went live last July, it has ordered Capital One Bank to refund $140 million to credit card consumers for questionable marketing of add-on products. At the same time, the federal Office of the Comptroller of the Currency hit Capital One with its own $10 million consent order tied to unfair billing practices from May 2002 to June 2011, for total refunds of $150 million. Additionally, Capital One must pay $60 million combined in civil penalties for the practices. CFPB director Richard Cordray said the bank's call center operators tricked customers with low credit scores or credit limits into buying "products they didn't understand, didn't want, or in some cases, couldn't even use" -- such as payment protection and credit monitoring -- when they activated their credit cards. As part of the consent orders, Capital One has agreed to refund the full amount of add-on products, plus interest, to customers who enrolled in them or tried unsuccessfully to cancel them on or after Aug. 1, 2010. Finance charges and other associated fees will be refunded as well. "We are putting companies on notice that these deceptive practices are against the law and will not be tolerated," Cordray declared.
- Prepaid Debit Cards Scrutinized by Regulators
Raleigh News & Observer (NC) 19 May 2012
As free checking accounts become more scarce, prepaid debit cards are taking the spotlight. The reloadable cards have been one of the fastest-growing bank products for years as lower-income customers look to avoid overdraft charges and fees. According to a new survey by the National Foundation for Consumer Credit Counseling, there are currently more than 30 million Americans using such cards. Adam Rust of Reinvestment Partners said approximately $300 billion was put on the prepaid cards last year, up from $30 billion in 2006. However, many say the cards carry high fees of their own. Now, the Consumer Financial Protection Bureau (CFPB) is getting involved. The agency recently announced that it will hold a hearing about the cards in Durham, N.C. It is seeking consumer feedback. Those in attendance will include CFPB director Richard Cordray and Martin Eakes with the Center for Responsible Lending.
- Returning Veterans Can Lower Credit Card Interest Rates
KSTP Eyewitness News ABC 5 (Minnesota) 16 May 2012
Although not widely known, the 2003 Servicemembers Civil Relief Act (SCRA) offers valuable protections for current and past members of the U.S. military. Under it, deployed veterans can serve out their missions overseas without worrying about finances. For example, the law prevents banks from foreclosing on veterans who are deployed. This applies not only during the active-duty period but also for nine months after. During this time, creditors cannot foreclose or repossess items from veterans without a court order allowing them to do so. The SCRA also caps loan interest rates at 6 percent while enlisted persons are on active duty, a limit that also applies to credit cards, auto loans, and business financing. Veterans who send a letter to lenders to request the 6 percent cap, within 180 days of coming home, are entitled to a credit or refund if their loan is fully paid.
- Stay-at-Home Mom Fights New Credit Card Rule
CNN Money 16 May 2012
A grass-roots campaign is gaining momentum against a new provision of the 2009 CARD Act that, starting in October of last year, has made it more difficult for stay-at-home parents to qualify for their own credit cards. The Federal Reserve rule dictates that credit card issuers consider individual income, rather than household income, to determine eligibility. As a result, many parents who rely on their spouse's income feel shut out of access to credit. One Virginia mom whose application for a Target card was rejected has refused to acquiesce to the new guideline, recently launching an online petition to persuade the Consumer Financial Protection Bureau -- which assumed jurisdiction over the rule last summer -- to amend it. The petition at Change.org already has garnered in excess of 30,000 signatures. "I used to be CEO of a small software consulting business and am now staying at home to take care of a toddler and first grader," wrote one stay-at-home mother on the petition. "If you had to pay someone to do what I do now, it would cost you at least $120,000, which is a lot less than what I used to earn. ... Don't you think I should be allowed to get a credit card on my own?" Holly McCall, the 34-year-old mother of two who organized the petition, delivered the signatures to the CFPB on May 15, supported by a handful of petitioners. Some of the women dressed as 1950s housewives, to illustrate how the rule "feels like a flashback to the 1950s because of the way women aren't empowered financially."
- Late Payment Rate on US Credit Cards Dips in 1Q
Associated Press 15 May 2012
U.S. credit card users are getting better about submitting their payments in a more timely manner, even as banks increasingly are issuing cards to borrowers with imperfect credit. The rate of payments 90 days or more overdue dipped in the first quarter to 0.73 percent, TransUnion reports, down from 0.78 percent in the fourth quarter of 2011 and 0.74 percent in the first quarter of 2011. While late payments are trending downward, cardholders are amassing more debt. The average credit card balance in the first three months of the year was $4,692 -- a jump of 6.1 percent from the same period of last year. Some of that shift may be explained by the cardholders themselves, as nearly a fourth of new cards issued in the 2012 first quarter went to higher-risk consumers. "We expect these consumers have been making active use of their cards, because in many cases they may not have had access to cards in the past couple of years," explains TransUnion's Charlie Wise.
- Recession Added Debt, Drained Families' Savings
USA Today 14 May 2012
One out of five families owes more on credit cards, medical bills, student loans, and other unsecured debt than they have in savings, finds a new University of Michigan report. Moreover, the share of families surveyed at the end of last year that have zero savings increased to 23.4 percent, up from 18.5 percent in 2009. The study also suggested that the mortgage meltdown has not yet come to a close, either. Among homeowners polled, 1.7 percent anticipate that they will fall behind on their house payments in the near future -- although that is down slightly from 1.9 percent who expected to have problems meeting their mortgage obligations in 2009.
- Higher Credit Card Fees Are Bad for Bank Business, Report Finds
Huffington Post 09 May 2012
According to a new report from the Center for Responsible Lending (CRL), excessive credit card fees are unfavorable not only for consumers but also for bank business. The study found that credit card companies that marketed aggressively and practiced deceptive pricing suffered double the charge-offs during the Great Recession than companies than issuers that did not. "When consumers are duped and are taken by surprise by costs and fees, they are more likely to default," explained CRL senior researcher Joshua Frank. The report looked at nearly two dozen marketing and pricing practices at the top 100 card issuers between 2006 and 2010. The report undermines the argument often put forward by financial institutions that higher fees offset the risk of lending to those with questionable credit.
- Chase Launches New Alternative to Checking Account
Associated Press (NY) 08 May 2012
JPMorgan Chase has introduced its new prepaid card, intended to provide an alternative to checking accounts. The reloadable Chase Liquid card is now available at 200 branches and will roll out nationwide this summer. The move comes as the mega-bank and others tries to recoup fees lost in the wake of a regulatory crackdown. In 2010, rules took effect prohibiting banks from signing up customers for overdraft programs without their consent. Banks took an additional hit last summer when rules were issued limiting debit card interchange fees. Chase's prepaid carries a fee of $4.95 per month. The bank is calling the card a "low-cost alternative to traditional checking accounts" with "clear and simple" terms. An increasing number of big banks have cut rewards program, introduced new accounts with higher fees, and launched new products such as prepaid cards. Chase said customers will have to provide a $25 deposit for the Liquid card but are not required to have a checking or savings account with the bank. Withdrawals and customer service support do not cost anything.
- Prepaid Debit Cards Come With Fistful of Fees
Fox Business 07 May 2012
In an examination of whether having a prepaid debit card makes financial sense, given the accompanying fees, Bankrate surveyed 18 such cards from March 19-23. Of them, 11 charged activation fees ranging from $3 to $14.95. Fees varied widely among issuers, indicating the importance of conducting some due diligence. On the plus side, unlike conventional checking accounts, it may be impossible to overdraft an account with most prepaid debit cards. About a third of the cards charged a declined transaction fee; but the penalty ranged from 25 cents to $2, compared to the average $30.83 per overdraft on a traditional checking account. This can be an advantage for spenders who struggle to manage a traditional checking account. Of the 18 cards in the survey, 14 also did not charge for automatic bill pay. Most prepaid cards, like many checking accounts, do have built-in monthly fees. Some cards offer an option to avoid that fee by setting up direct deposit or loading a certain amount of money each month. Consumers who frequently use ATMs may want to avoid prepaid debit, as many issuers charge a fee for each ATM transaction. However, only three of the 18 surveyed debit cards charged a fee for making PIN-based, point-of-sale purchases. Card issuers also generally charge a fee for running a balance inquiry at an ATM, getting account information in the mail, or checking balances. The survey found that the American Express Prepaid Card, the H&R Block Emerald Card, and the PNC Bank SmartAccess Prepaid Visa Card appeared to be the most consumer-friendly.
- Alumni Credit Card? First, Lose the Greedy Pitch
Time 03 May 2012
Although the Credit CARD Act aimed to stop issuers from marketing to students, a study from the University of Houston Law Center found that the practice is still going on. Many students still receive mailed offers and gifts for applying for credit. To avoid suitability restrictions, card companies may consider student loans as a source of income. Some card offers even recommend that users "carry a low balance" on a card because "this helps your [credit] score more than paying off the balance in full each month," although this is not always true. Card holders have nothing to gain by paying interest on their balance. Card offers also have suggested that borrowers not use more than half of their available balance, or credit limit. In fact, users should keep the balance below 30 percent of the credit limit, or even closer to 10 percent. Some cards may include good offers for college students, such as no annual fees, a good starting fixed rate, and free credit scores. Since universities can earn millions of dollars through credit card programs, they may also want to look toward promoting sound financial habits as well.
- Pesky Fees That Could Surprise You Are Out There, And They Can Add Up In a Hurry
Detroit Free Press 03 May 2012
Although most consumers are familiar with annoying fees, many of them often go unnoticed. In Michigan, for example, lenders can charge a 45-cent verification fee for each payday loan transaction verified through a state database that makes sure individual consumers do not take out too many loans at the same time. Failure to repay the loans on time also attracts fees. Payday lenders can charge a returned check fee of $26.88, regardless of whether the loan was for $100 or for $600. "People can get into trouble because this can snowball into a bigger problem," according to Lisa Ross of the Michigan Office of Financial and Insurance Regulation. Some credit unions and banks charge fees of up to $5 for mail returned from an invalid address, so consumers should promptly update their addresses if they move. When buying or selling a home, the average home inspection should run about $350 to $700, but some places will try to charge as much as $1,000. Some scams try to charge individuals $20 to claim a fake sweepstakes prize, a practice that the Federal Trade Commission is cracking down on. There are also fees associated with secured credit cards, such as for raising the credit limit or a processing fee. Consumers looking to buy a car should also watch out for inflated documentation fees.
- Credit Card Companies Still Advertise to College Students
Daily Cougar 30 Apr 2012
Although a 2009 law forbids the practice, many credit-card companies are still advertising to students under age 21, according to research by a University of Houston professor. The Credit Card Accountability Responsibility and Disclosure Act was meant to change the unfair practices of consumer credit plans. The law included a revision of the 1970 Fair Credit Reporting Act, which said credit card marketing companies could not get information on anyone under 21 from organizations providing credit reports. The bill also encourages limits on college campus promotions by card companies. UH Law Center Assistant Professor Jim Hawkins' survey of over 500 students found that 68 percent had received credit card offers in the mail within the past year. Forty percent of respondents said they had seen credit card marketing companies promoting gifts to students after the bill took effect in 2010. Hawkins looked at 300 credit card agreements between college students and credit card issuers, finding that about 64 percent had not changed since the bill was passed.