Credit card companies won't quit

The primary effective date for the Credit Card Act of 2009 -- Feb. 22, 2010 -- has come and gone. But the impact of this law is only now being felt. It offers many positive features for consumers who use credit cards: increased disclosure, limits on the capacity of issuers to change agreement terms and elimination or curtailing of pernicious practices such as double billing cycles, disproportionate fees, mandatory allocation of payment clauses and extensive fees on subprime credit cards.But since the law's passage, issuers have made significant changes to credit card agreements and credit practices that will negatively impact consumers. These changes are a concerted effort to recoup the financial losses engendered by the new law because, make no mistake about it, consumer credit card use is big business -- a more than trillion dollar business.
Some examples: Since there is no interest rate cap in the new law, companies are increasing rates -- something that was less common when fees, not interest payments, generated key revenue streams.
They are adding up-front membership fees, lowering credit limits and shifting from fixed to variable interest rates.
They are increasing the size of minimum payments and augmenting minimum finance charges. They are prohibiting overdrafts rather than developing appropriate opt-in provisions. They are rebating interest payments for timely payments to avoid limitations on double billing cycles, increasing foreign exchange fees and eliminating the valuable grace period.
In short, credit card companies are working hard and seemingly successfully to find new ways to generate revenues that do not overtly violate the law. What bothers me is that some of these approaches run contrary to the spirit of the new law, whose goals were to increase accountability, create simplicity, prevent unfairness and target and eliminate abusive practices.
A lesson from our bankruptcy laws is relevant here. When we became concerned about consumers violating the bankruptcy laws some years ago, a new provision was added that allows a court to dismiss a case if an individual debtor's filing is a "substantial abuse" of the bankruptcy process (Section 707(b)). Courts have spent considerable time defining what that terms means (and a more definitive standard was enacted later), but the idea was to foreclose bad behavior, even if we cannot predetermine exactly what debtor behavior is abusive.
Why couldn't we have done something similar with respect to the credit card industry -- banning it from substantially abusing the provisions of the new law? Obviously, the credit card companies would have lobbied hard to prevent such a provision -- although they were strongly in favor when it applied to consumer filings in bankruptcy. But, the idea is right because clever planning to circumvent the new law undercuts its purpose.
My point is simple: Consumers still need to be vigilant with respect to their credit cards and evaluate carefully the onslaught of new mail they are receiving from their credit card issuers. The Credit Card Act of 2009 notwithstanding, consumers still can and will be taken advantage of in the consumer financial markets.
Unfortunately, "consumer beware" remains the watchword of the moment.