The CARD Act: what is done and what is left to do

There were times when credit card companies could increase your interest rate or change your payment due date without warning. Of course such changes led to late payments or exceeded credit limit and as a result consumers were hit by high penalty fees.

But that does not a norm anymore since the Credit Card Accountability, Responsibility and Disclosure (CARD) Act was signed into law. The CARD Act shed light on the opaque pricing structure making hard for credit card companies to put the screws on customers.

Not everything went right. The Act failed to prevent credit card companies from peddling useless debt-protection products or unclear promotional financing deals.

Still there is a lot which was done since the CARD Act acceptance. Here’s a brief list of what went right:

• The CARD Act placed limits on fees and rates. Such fees like for not using your card and other multiple fees in a single billing period for being late on a payment are gone. That, as estimated by experts, has saved consumers billions of dollars a year since the Act adoption.
•  The credit card statements must now say how long it will take to pay off the balance if you only pay the minimum each month. Because of that consumers show tendency to pay down the debt faster.
• The CARD Act’s requirement to make penalty fees “reasonable and proportional” to the violation of account terms was a key change. Credit card companies can no longer charge more than $25 in late fees unless one of the previous six payments was late.

And here are current CARD Act shortcomings:

• You’ve probably seen the cards with deferred interest (or cards with introductory periods). This kind of plastics is widely offered to the consumers recently. They let customers finance purchases without interest for a period of time. But there is a catch: if the balance is not paid in full by the end of that period, you will have to pay the accumulated interest. You will owe the retroactive interest. This part is not always clear and now is under examination by regulators.
• Most credit card companies stopped charging customers for going over their credit limit. The CARD Act lowered the fees and required that customers opt-in to have limit-bursting transactions covered by card issuer. Of course customers must understand that they will pay fees for the service. Lots of people prefer to have the option of overdraft, but banks are not transparent about the service.
• There is no industry-wide standard on prepaid card fee disclosure. Some prepaid debit cards have concise explanations of fees, others do not because there is no legal requirement for companies to spell out all possible charges to consumers.