Their accusation seemed to lay to rest concerns that one consequence of the new card reform law would be a blending of cards in the card marketplace and a resulting loss among credit union card issuers to the claim of being more consumer friendly.
Consumer Action, Consumer Federation of America, the National Consumer Law Center and the U.S. Public Interest Research Group made their charges in a Nov. 20 letter to the Fed complaining that large issuers were still putting into place retroactive rate increases, over-limit fees, so-called variable rates that only increase and never decrease and avoiding the consumer's ability to opt out of rate increases and close their account to pay it over time.
"The ink hadn't even dried on the president's signature on the CARD Act when we began seeing runarounds by the credit card companies," noted Lauren Saunders, managing attorney of the National Consumer Law Center's Washington office.
"Even if you read all the new changes in terms that are coming stuffed in credit card bills, chances are the disclosures will not reveal the tricks hidden inside" said Linda Sherry, director of national priorities for Consumer Action.
"Incredibly, the Fed even proposes to allow banks to perpetuate unfair marketing to college students, even though Congress said to stop," said U.S. PIRG Consumer Program Director Ed Mierzwinski. "The Fed will allow banks to keep enticing students with free pizza at campus tables, so long as all the students who stop get free pizza, even if they don't sign up for a card."
Among the sorts of things the consumer advocates cited in their letter were practices like retroactive rate increases.
The Credit CARD Act prohibits rate increases on existing balances unless the consumer is over 60 days late, the organizations declared, charging that at least one major issuer is evading that rule by purporting to charge an annual percentage rate of 29% but promising to refund 10% the next month if customer pays on time. In effect, this allows a 10% retroactive rate hike if the consumer pays even one day late.
The organizations also attacked the alleged continued use of over-limit fees, pointing out the new act prohibits such fees unless consumers agree to have over-limit transactions approved.
But the groups complained some big card issuers are continuing to approve over-limit purchases without the consumer's opt in and then demanding that the over-limit amount be paid in full. Then the groups alleged the large issuers charge an over-limit fee but call it a late fee. This tactic can also push the consumer into becoming 60 days late and subject to a retroactive rate increase, the groups said.
The consumer organizations also attacked a topic other consumer groups also decried, the use of so called variable annual percentage rates that, in fact, are only variable on the up side. The new act allows retroactive rate increases caused by changes in a variable index outside the company's control, the groups acknowledged, but they charged Barclays, Wells Fargo and U.S. Bank, among others, are using variable rates that only go in one direction- up-or are picking the highest rate in the previous 90 days.
Spokesmen for major bank card issuers declined to comment on the letter because they said they had not seen it, but one pointed out that that the act was still new and said her bank's card practices were still "evolving" to meet the market.