July 23, 2010
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CCARDA Protections Circumvented, Pt.4
More tricks of the trade.Rebate Cards: As mentioned above, CCARDA provides credit card consumer protections from jacking rates on old debt. One of the worst abuses that CCARDA tried to stop was for credit card lenders to lure in hapless consumers to run up big debt by offering very low interest terms. After the dept is sufficiently high so the consumer can't readily pay it off -- bang! The lender finds a convenient excuse to jack that rate sky-high in order to collect high-markup profits from a person who is now stuck. To stop this practice CCARDA ruled that APRs on existing debt could not be arbitrarily jacked for frivolous infractions, the most common being a day-late payment. Now, a consumer must be at least 60 days late on a credit card payment. Some banks like CitiBank are skirting that protection with their new "Rebate Care". The lure is a 70% rebate if all the payments are made on time. Since this is a built-in contract, CCARDA can't protect the hapless consumer.
Shortened Billing Cycles: CCARDA credit card protections require that companies allow at least 21 days from the statement mailing date until payment is due. Occasions and consumer complaints abound with cases where something went wrong. Often times, the problems lead back to the credit card lender. The biggie is when the lender shortens the billing cycle (which they can still do legally).
Not a one-sided issue: So far, we've be mostly bashing the banks (lenders). But there also is a very significant other side. Consider that CCARDA is already expected to cost the credit card industry about $390 million a year in fee revenue alone (this data furnished by the Nilson Report). Beyond that, most larger credit card banks are still plummeting into the red at an alarming rate. For example, BofA, one of the nation's largest banks may be forced to write off a phenomenal $10 billion just for this quarter-year. These figures should concern us all. Much of it is being prompted by CCARDA restrictions and some other regulation changes being considered right now.
When one looks at the full picture, we can easily see that the gargantuan losses already burying our banks dwarf the meager gains they might stand to make with the menial (and legal) techniques they're creatively using. Considering that all of the other large credit card institutions have a similar tale, we realize that in order for it all to work, it must be a two-way street.