NEW YORK - Credit-card customers are facing fewer interest-rate hikes and forking over sharply less in late fees.
A year after new regulations curbed a spate of questionable billing practices, federal officials say over-the-limit penalty charges have also been dramatically curtailed.
The findings were released by the newly created Consumer Financial Protection Bureau, which will administer the regulations once it's officially up and running this summer.
The agency focused only on the impact of specific regulations and did not look at the full scope of costs customers pay for cards. For example, new credit-card accounts are now more likely to come with annual fees and higher interest rates. That could offset the savings noted by the consumer watchdog. The regulations have also greatly reduced available credit for riskier customers, the American Bankers Association said.
The findings were part of three sets of data presented by the agency at a conference it hosted Tuesday on the first anniversary of the Credit Card Accountability, Responsibility and Disclosure (or CARD) Act.
Here are some highlights:
Fees and rate hikes
Penalty charges overall are down. In January of last year, just before the regulations took effect, cardholders paid $901 million in late fees. That amount was more than halved to $427 million by November, according to the agency. Also, the number of accounts that were assessed late fees fell by nearly 30 percent.
One reason for the drop in late fees is a new $25 cap on penalties. The fee can rise to $35 if there is a second violation within a six-month period. That helped bring the average late fee down to $23 from $35.
Also, issuers can no longer hike rates on balances or in the first year after an account is opened, and cardholders must be given 45 days' notice before the rate is hiked on new purchases.
Before the regulations, about 15 percent of accounts saw rate hikes over the course of a year.
Card-issuer policies
A separate survey of the nine-largest card issuers found that two-thirds no longer charge over-the-limit fees.
Before the regulations, card issuers often approved transactions that caused cardholders to exceed credit limits. Customers would then be charged fees as high as $39. Now, they cannot be penalized for going over limits unless they opt for such transactions to go through.
The dropping of over-the-limit fees shows "much of the industry has gone further than the law requires," said Elizabeth Warren, a Harvard professor who is charged with setting up the protection bureau. Still, she noted that some issuers responded to the regulations by looking for ways around them.
That's why the agency will focus on continuing to make information about card prices easier to understand, Warren said.
Consumer understanding
In another survey conducted by the agency, 30 percent of respondents said they were not familiar with the CARD Act, but most noticed changes it brought about, such as payments that are now due on the same day each month and statements with information on the projected interest costs of making only minimum payments.
About a third of customers who noticed the new disclosures said it caused them to take action, either by making larger payments or by curbing spending.
To sharpen consumer understanding of the cost of credit, Warren said, the agency will look at improving transparency without an "overreliance on rules."
by Candice Choi Associated Press Feb. 23, 2011 12:00 AM
Consumer credit-card gains touted
