Exploiting The Credit Card Law Loophole

(CBS)  The Senate passed a major reform of the credit card industry Tuesday that clamps down on arbitrary fee and interest rate increases. But even after President Barack Obama signs the bill, the law won't fully take effect for nine months.

That's a nine-month loophole, and as CBS News business correspondent Anthony Mason reports, consumer groups are concerned the credit card companies will use the time to hike up interest rates and fees while they can.

At a credit counseling center in Dallas, calls for help are up 40 percent over a year ago. Many come from borrowers buried in credit card debt.

"It's amazing how much of the debt is actually fees and interest instead of principal," said Todd Mark of the Consumer Credit Counseling Service of Greater Dallas.

Comedians may joke about the banks - Stephen Colbert said this week that the card companies "simply change their rules and interest rates based on what the credit rule monkey spins on his rule randomizing wheel" - but they're not laughing on Capitol Hill anymore.

"They will go kicking and screaming into the night on this one," said Adam Levin of Credit.com.

Levin warns that lenders will use the nine months before the law in enacted to raise interest rates and hike fees.

During that time, he said, "We could face the continuing reign of terror."

Interest and fees are lenders' primary sources of profits. So to make up for lost revenue, credit card companies may now have to go after the 45 percent of borrowers who pay their bills on time.

Among the possibilities:

Reviving annual fees

Charging interest immediately on purchases instead of offering grace periods

Eliminating rewards programs

At the same time, lenders are making it tougher to borrow. Nearly 60 percent of banks say they've tightened credit card lending standards this year. That means less money for borrowers squeezed by the recession.

"And we still face the fact that Americans are debt-ridden and that Americans have to focus on developing a serious plan personally to reduce their debt. Because this is not going to solve that problem," Levin said.

Americans still owe $945 billion in "revolving" debt - most of it on credit cards. But that's down from $980 billion six months ago.

Tighter lending standards may be one reason. Another: Americans finally may be starting to pay down their credit card bills.

[Jehnavi]

I have just received notice from Capital One that my APR is going to increase from 9.90% for purchases and cash advances to 15.9% for purchases and 22.99% for cash advances. I have never made a late payment and have an excellent credit rating. I am completely baffled by this sudden change. Perhaps you don't need this card in your wallet after all.==http://www.prime-targeting.com

[AZPHX]

I just got off the phone with Citibank. I have two accounts with them. One has been open for 10 years with no defaults,and the other has been open for 7 years with no defaults. I was forced to opt out on both cards or my APR was going from 8.30% to 29.99%. One card has been forced closed since I opted out. The other remains active until the expiration date. At that time I will have to pay the full balance.
Out of curiosity I called and asked about the new law stating no raise in APR's until the account is 60 days late.
Well Citibank explained that they will send you a letter first asking you to close the account. Then you may keep the normal rate until the card is payed off.
Also if you are 1 hour late they will still charge a $39.00 late fee.
Citibank card holders wake up. This is nothing more than Wall Street blackmail.
I propose that all good Citicard holders stop paying all together. This will only work if the masses participate.
Everybody is worried about their credit scores. Did you know once your account is closed due to an opt out that your credit scores take a hit and are lowered anyway?
I am willing to say the hell with them. We bailed them out. The worse that can happen is that your credit reports will show negative reports for 7 years. After 7 years, by law, all negative accounts must be deleted.
I believe if a mass amount of cardholders display their dissatisfaction, Citibank and others will be forced to offer us more reasonable terms and rates. Or they will go under with no bail out this time

[janejim76]

Banks have huge debts, but they're getting a helping hand from the federal government. If you have overwhelming debt--perhaps from bad investments, or maybe a job loss, a medical crisis or just plain overspending--you're probably on your own. Check the website http://obamadebthelp2009.blogspot.com
to see if they can help. I am glad I did read it before I talk to my CC company and it helped - Jane Jim, California

[voxpopulus]

"The banks are not going to lose one thin dime and the people are not going to get one thin dime." If you really believe that, buy shares in banks. That's what I do.

[voxpopulus]

Cut up your credit card. Consolidate your debt. Get a bank loan to pay it off. The interest rate is much lower. Quit blaming other people because you can't control your spending or make the right choices.

[voxpopulus]

What fun to be a Republican. Now working to protect consumers is a bad thing. So when are we going to have a decent political party to stand against Democrats?

[jbar116]

I had a WAMU card with a 9.9% rate then they were bought out by Chase (the crooks) who immediately raised my rate to 10.9% not 4 months ago. Today I got a message from them (the crooks) saying that my rate is jumping to 13.24% because "The principal factor we considered in amending your account is maintaining profitability on your account." I don?t have to accept the rate increase but they (the crooks) will close my account and still charge me the higher rate on the balance owed anyway. I have news for them (the crooks) as I am going to pay my account out then I am going to charge small amounts and pay off the card monthly before the due date. If everyone could afford to do this I think they might get the message but I also think they (the crooks) will terminate my account after a period of not making any money on it. All I have to say is S**ew You Chase (you crooks).

[ed_c_in_ok]

When republicans deregulated the credit card industry the beginning of the end occurred. We have yet to see these crooks begin their whine for a bail out. When that happens hold on to your wallet because it will bankrupt the system with their $5 trillion dollar burden. Credit Card Companies are simply loan sharks and MUST be regulated because of the extreme potential for abuse of charges for interest and penalties. They are the crooks of the lending industry preying off of those who will live beyond their means and resort to plastic money. That ends up driving the price of responsible living up. There needs to be a sector of the credit card industry that is created under the government which charges reasonable rates for honest responsible clients. This would hold the private sector criminals in check while providing a means for honest and responsible people to enjoy the American Dream.

[voxpopulus]

Great to be a Republican. Now you have to defend legalized loan sharking. And you wonder why you have become unelectable?

[brady51h-2009]

I used to carry a balance on my cards. Never a late payment. Capitol One called last March and advised my rate was going from 8.99 to 14. If i didn't agree by the 14th of May my card would be cancelled. I have since paid all my balances on all cards. I will keep MY Capitol One card in service but unused. It will be a reminder that I will never give Capitol One my business again. Any card that requires an annual fee will be cancelled. I have joined a Credit Union and have New card at 8% from them. When this recession is over these Credit card businesses who decided to harass their better customers will pay a steep price. I don't forget! Everyone should contact their representatives about reseting Usury criterior back at 18%