California Credit Law Blog

A report by the Pew Charitable Trusts found that most credit cards include “unfair and deceptive” practices as measured by new Federal Reserve guidelines that go into effect in 2010. Reviewing consumer credit cards issued by the 12 largest companies that represent 88% of outstanding credit card debt, the study found:

• 100 percent of cards allowed the issuer to apply payments in a manner which, according to the Federal Reserve, is likely to cause substantial monetary injury to consumers.
• 93 percent of cards allowed the issuer to raise any interest rate at any time by changing the account agreement.
• 87 percent of cards allowed the issuer to impose automatic penalty interest rate increases on all balances, even if the account is not 30 days or more past due. The median allowable penalty interest rate was 27.99 percent per year.
• 72 percent of cards included offers of low promotional rates which issuers could revoke after a single late payment.

The authors of the study call for legislation to ensure that cardholders are charged only the interest rates they agreed to pay; fees are imposed responsibly and in a transparent fashion;
cardholders have sufficient time to review and pay their bills; and Interest is not charged on balances cardholders have already paid.