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Dodging Reform: As Some Credit Card Abuses Are Outlawed, New Ones Proliferate

December 10, 2009
Credit & Prepaid Cards

Report Author: Josh Frank

As of Jan 12, 2010, the Federal Reserve has effectively ended the "pick-a-rate" practice and the use of variable rate floors. These two abuses are featured in the 12/10/09 Dodging Reform report.

Download the full report >>
Download the executive summary >>
Download table of abusive practices >>

CRL's new report, Dodging Reform, finds:

  • Issuers have adopted schemes to game interest rates, with the little known "pick-a-rate" practice gaining increasing momentum. Pick-a-rate costs American consumers $720 million per year and it may reach up to $2.5 billion annually as the practice spreads.
  • Issuers have shifted penalty fee structures to charge 9 out of 10 people the highest fee possible if they pay late, while projecting the appearance of lower fees. The average late fee today is $39, while the typical past-due amount is about $50.
  • Issuers are padding their other miscellaneous fees since the announcement of new Federal Reserve rules and passage of the Credit CARD Act, disguising many of the charges.



Josh Frank, CRL senior researcher and report author, briefly
discusses report findings, particularly
pick-a-rate and tiered late fees.

American families rely on credit cards to help pay bills, buy groceries, and make ends meet. Particularly during the holidays, they shouldn't be unfairly nickel, dimed, and dollared by their credit card company. The money lost to fees could be better spent on productive goods and services and on saving for retirement.

The Consumer Financial Protection Agency would address the ongoing problem of issuers' always-changing industry strategies. A real-time regulator to strengthen legislation and Federal Reserve rules is essential. It's time to end the abusive tricks and traps and give American families a break.

The animated political cartoon, "Credit Card Reform in Action," by Mark Fiore inspired the Dodging Reform report cover stillshot above. View the cartoon in its entirety.