Editorial: The Customer Always Comes Last

Editorial: The Customer Always Comes Last
Copyright by The New York Times
Published: August 24, 2010
http://www.nytimes.com/2010/08/25/opinion/25wed2.html?th&emc=th


The credit card industry is working hard to subvert the Credit Card Act of 2009, which banned many of the industry’s most predatory practices. The Federal Reserve Board, which oversees and coddles this industry, needs to ensure that consumers get the protections Congress intended, and Americans so clearly need.

The law’s final provisions went into effect this week, and if they are vigilantly enforced, they should end many of the abuses that had become standard practice.

It requires card issuers to give a 45-day notice before raising interest rates, bars companies from raising interest rates on existing balances under all but a few circumstances, and requires that late charges and other penalties be “reasonable and proportional” to the customer’s infraction.

It also bars companies from charging customers upfront fees that come to more than 25 percent of the available credit line. This was intended to put an end to “fee harvester” credit cards, under which consumers could be charged hundreds of dollars in fees for cards that left them with credit limits as low as $50.

Watchdog groups say that companies are already eagerly exploiting gray areas in the law, either by concocting new charges or relabeling old, disallowed charges.

The St. Louis Post-Dispatch recently reported the case of an elderly pensioner who was charged $179 in initial fees for a credit card that carried a credit limit of only $250. An executive of First Premier Bank, which issued the card, suggested to the paper that the charge was legal because the new law “does not preclude fees charged prior to the account being opened.” That sounds like a scam to us.

The Fed also needs to take a hard look at problems cited last month by the Pew Charitable Trust Safe Credit Cards Project. It found that despite the law’s demands for more transparency, card issuers are still withholding important information. Companies are failing to disclose penalty interest charges, which could double or even triple the interest rate for cardholders who fall two months behind.

Time and again, the credit card industry has demonstrated its disdain for its customers. The Fed needs to press these companies to live up to the law.