Credit cardholders’ bill of rights can’t come soon enough

The “credit cardholder’s bill of rights” will start to take effect early in 2010, and some portions will be phased in even later. That’s too bad, because we really need it immediately. As profits fall, banks have tried to squeeze consumers to preserve their bottom line; as a result, credit card practices have become even worse than they already were. The Pew Health Group’s Safe Credit Cards Project is out with a new report showing the extent of the damage:

Our research included an examination of nearly 400 credit cards, including all consumer credit cards offered online by the largest 12 bank issuers in America. These banks control more than 90 percent of outstanding credit card debt nationwide.

We found that median advertised interest rates on bank credit cards were between 13 and 23 percent higher compared to rates in December of 2008, depending on a consumer’s credit profile. Meanwhile, practices labeled “unfair or deceptive” by the Federal Reserve remained as widespread as they were before Congress passed the new credit card law. In fact, some of these practices had become even more common. In sum, all surveyed bank cards included at least one “unfair or deceptive” practice. None of these cards would have met the requirements of the Credit CARD Act.

In the interests of being as clear as possible, I should point out that the increase in rates is 13 to 23 percent, not 13 to 23 percentage points. In other words, rates have increased between roughly one-eight and one-quarter of the December 2008 rates, or around 2 to 3 percentage points. That’s not quite as bad as it reads, but it’s still a huge increase in less than a year.

Also, some of the specifics in the report are even worse. For instance, “95 percent of bank cards allowed issuers to apply payments in a manner that the Federal Reserve found likely to cause substantial monetary injury to consumers.” This typically means that if a card has balances being charged at multiple interest rates, banks apply payments first to the balance with the lowest rate, allowing them to charge you the maximum interest. And as if 95 percent wasn’t enough, the actual figure is probably even higher. The other 5 percent didn’t necessarily engage in fairer practices; they simply refused to disclose their policies.

Take a look through the full report, and join me in counting down to a time when credit card practices are a bit more humane.