October 30, 2009

• Pew Reports Credit Unions A Safer Place To Be, Pt.2
    Develop a safe environment.

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  The data gathered by the Pew Project surrounds the activities of the U.S. banks that control 90 percent of the nation's outstanding credit card debt as well as the top credit unions in the country. This report supports the allegations that card issuers have actually stepped up their deceptive practices and is supported by the following statistics:

  • 99.7 percent of the credit card issuers raised interest rates on outstanding balances over the past six months.
  • 95 percent of card issuers participated in accounting practices that unfairly applied payments to outstanding balances that caused "substantial financial injury" to Americans.
  • 90 percent of credit card issuers imposed stiff penalty rate increases that were unjustly applied due to minor slips such as an occasionally late payment.

  The report also showed that the advertised credit card annual percentage rate (APR) for new purchases increased 13 to 20 percent from December 2008 to July 2009. In December, the advertised average rate ranged from 9.99 to 15.99 percent. In July that average increased to an advertised range of 12.24 to 17.99 percent. The Pew's Project included recommendations for the Federal Reserve whose responsibility it is to develop a set of guidelines that would impose penalties on lenders who violated the rules and regulations of the new Credit CARD Act which include:

  • Include in its rules tagged "reasonable and proportional" measures to regulate interest rates that impose a penalty based increase.
  • Canvass variable rates which increase as the prime rate index rises but does not drop below a minimum as set by the card issuer.
  • Ban credit card penalties that are not in alignment with the primary goals of the law which is to protect consumers against deceptive practices.

  In conclusion, Nick Bourke, Manager of the Pew's study stated that the new legislation will make the credit card industry a safer environment; however, the study revealed that every lender review in the Pew Project continued to participate in deceptive practices. Bourke said that lenders must act immediately to "ensure their products are clear of" these predatory practices.
  
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