In the third and final phase of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD) which went into effect yesterday, issuers were restricted in the scope of late fees they can impose on borrowers. For example, penalty charges are capped at $35. Issuers also need to give a 45-day warning before increasing interest rates on existing balances.
But in response, some banks are expected to set higher initial interest rates.
The average credit card interest rate rose to 14.7 percent from 13.1 percent in the second quarter, its highest level in 9 years, according to research firm Synovate (h/t WSJ). This rate is 11.45 percentage points higher than the prime rate, the benchmark against which card rates are set. This is the largest margin between prime rates and average credit card rates in 22 years, according to Synovate.
As much as the new laws aim to protect, lenders are finding sneaky ways to recoup lost revenue. As Beverly Blair Harzog, contributing editor of CreditRatings.com, wrote in her blog entry entitled 'Think You Understand the New Credit Card Laws? Think Again', issuers have also found creative ways to ramp up fees for "unintended consequences" such as foreign transactions and over-the-limit fees.
So what can consumers do to protect themselves from, well, these of consumer protection laws? Harzog writes:
For starters, pay your bills on time. Even though some of these tactics are probably illegal at this point, it's always better to be proactive and prevent the penalty APRs from being an issue in the first place. Be your own consumer advocate by making sure you read every piece of mail you receive from your issuers. If you feel you've been unfairly treated--either due to interest rate changes or any other type of fee that looks out of line--contact your issuer immediately and stand up for your rights.