New Credit Card Rules Protect Consumers But at a Cost

South Florida Sun-Sentinel
August 13, 2010
Hemlock, Doreen

The final installment of the credit card reform act takes effect on Aug. 22; and it could mean lower credit limits, higher fees, and fewer rewards for many account holders as issuers try to recoup lost revenue. Card companies are expected to see a significant decline in revenue as a result of the law -- which restricts late payment penalty fees, bans inactivity fees, and requires issuers to re-evaluate interest rate hikes periodically. Some issuers may even try to skirt the rules altogether; and Josh Frank, senior researcher at the Center for Responsible Lending, says, "It's up to the regulators to keep the issuers honest." Among the most important changes that have come from the credit card reform are restrictions on interest rate increases, regulation of the application of payments, and a ban on "disproportionate" penalties for minor infractions. Still, new trends have emerged that could cost card holders significantly, including higher fees for cash advances and balance transfers. According to Ed Mierzwinski of the U.S. Public Interest Research Group, "there's still too much leeway granted to banks and credit card companies." Just how uneven the implementation is can be seen in the two loopholes found in the Aug. 22 law: companies can find ways to show that costs justify higher fees, and issuers can raise minimum payments to charge more. Frank of the CRL added, "Regulators need to make sure that there's no funny accounting going on to justify higher costs and fees." Consumers should stay informed and feel free to opt out and shop around for another card if they do not like the significant changes in terms proposed.
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