May 232009

President Obama has just signed into law the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009. The law protects consumers by outlawing somne of the worst credit card company abuses, such as retroactively raising interest rates on balances, manipulating payment due dates and charging high fees for paying a bill by phone or online. Yes, that’s right, some credit card companies have been known to charge customers fees for paying bills online. Why? Who knows. Just another way to jack up their profits.

I’m not naive. I know the credit card companies are not going to give up an estimated ten billion dollars in profits (that’s how much this bill may cost them). They will look for ways to recoup their profits. Deb Price writes in the Detroit News,

“In response to the new limits, credit card companies could add annual fees for cards, end interest-free grace periods, make cuts in reward programs, tighten credit, raise rates or lower card limits, analysts say.

If card issuers do add new fees or raise interest rates in response to the new law, the changes will have to be disclosed up front so customers will have a better idea of just how much they’ll pay to put purchases on their cards.

“The new rules definitely will help keep balances from increasing as quickly as they have in the past,” said Dianne Reichel, a credit counselor with GreenPath debt management in Detroit.

Many clients of the nonprofit agency have gotten in over their heads not only because of high credit card balances but also because of hefty fees and penalties that also push interest rates up to nearly 30 percent.

“For a lot of people who come to us, it just builds and builds and that’s when their debt spirals out of control,” Reichel said.

Consumer advocates and Democratic legislators, including Levin and Rep. Carolyn B. Maloney, D-N.Y., have pushed credit-card reforms for years. This bill finally passed because a Democratic president and Congress tapped into public fears over the sinking economy and outrage at being gouged by the bankers taxpayers have bailed out during this financial crisis, Levin said.

“The public has really been incensed about it for a long time, but we also had a Democratic president who would sign the bill,” Levin said. “That was not the case with President Bush.”

As welcome as the new credit card rules are, they won’t solve everyone’s debt woes, noted Reichel, the GreenPath credit counselor, especially for people who simply charge more than they can afford to pay off.

“I don’t think it’s the fix for everybody’s credit problems, unfortunately, because consumers still need to control their spending and really make an effort to pay down their bills.”

Still, I’m glad the President has taken a step toward eliminating these exploitative practices. I feel like we finally have someone in the White House who is looking out for the best interests of the people.

May 012009

In an article in the online version of the Arizona Daily Star, Dale Quinn points out that while paying bills online can be very convenient (and saves money on postage), it can be a real hassle if you lose your credit card. He tells the story of Drew Vactor, a Tucsonian who owned Tucson’s famous Tack Room restaurant, and who owned the same credit card for years. Mr. Quinn writes:

He used the card, a Citi Mastercard, to automatically pay about 10 bills, mainly utilities — until one day recently he was issued one with a new number.“It’s not a major thing, but it probably took an hour or so to go through and notify them all,” he said.

Vactor was glad he kept a list of all accounts for which he had set up automatic bill payments. Otherwise it would be tough to remember them all, especially because the time between billing periods varies.

He called his card company to find out what happened. At first someone told him his card might have been lost or stolen, but that wasn’t the case, he said. After a bit of cajoling, he learned there had been a security breach and several customers had been issued new cards.

The credit company wasn’t forthcoming with many details, he said. “They were really hesitant.” 

In response to Vactor’s story, a Citi spokeswoman claimed that Citi takes immediate action on any customer accounts that have been affected by a security breach; and she acknowledged that some credit card accounts may have been compromised by a malicious software attack in 2008. The article continues:

Companies with customers who use automatic bill pay find that if they don’t change the account information, the payment gets rejected.

Cable and telephone companies, fitness clubs and movie rental Web sites often allow their customers to set up automatic online payments.

Susan Sipp, the account manager for Tucson Racquet & Fitness Club, said that when she ran automatic credit-card payments each month she usually got 25 rejections. In recent months it’s been closer to 50, she said.

In that case, the fitness club has to contact the customer to find out why the card was rejected and if there is a new number.

In a good percentage, people’s credit cards have been changed because of the bank and they just forgot to notify us,” Sipp said.Lee Hill, another consumer who was issued a new credit card and number, said her issuer told her a vendor where she used the card had been compromised. She had about six or eight bills that were paid automatically through the card.The bank could have given her a bit more information to make sure all the bills would keep getting paid, she said.

“They don’t really tell you if you have automatic charges be sure to call all these vendors because your card won’t be any good,” Hill said. “It’s not insurmountable, but it’s a pain in the neck.”Vactor agreed that dealing with the new card was a bit of a hassle. But ultimately, he appreciated his credit-card company taking the precaution and issuing him a new card if there was a chance his information had been compromised. 

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