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SAFE CREDIT CARD STANDARDS
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Short Description: Feb 12, 2009 ... Development of the Safe Credit Card Standards would not have been possible without the participation of the many ...
Content Inside: SAFE CREDIT CARD STANDARDS Policy Recommendations for Protecting Credit Cardholders and Promoting a Functional Marketplace EXECUTIVE SUMMARY Credit card companies have powers unique in the Our survey found that each credit card included one world of retail lending. After a consumer has agreed or more practices that qualify as "unfair and to the terms of a credit card account and used the deceptive" under recently announced Federal card to make purchases or obtain cash advances, the Reserve guidelines. For example: card issuer may lawfully rewrite the agreement or demand a higher rate of interest, even on funds · 100 percent of cards allowed the issuer to previously advanced. In a one-year period between apply payments in a manner which, according 2007 and 2008, issuers used these powers to raise to the Federal Reserve, is likely to cause interest rates on nearly one quarter of cardholder substantial monetary injury to consumers. accounts. These added charges are not reflected in the advertised annual interest rate, which is the key · 93 percent of cards allowed the issuer to raise price point consumers use when choosing credit any interest rate at any time by changing the cards. By rewriting agreements, and by giving account agreement. themselves broad contractual rights to impose fees and rate increases automatically--practices that the · 87 percent of cards allowed the issuer to Federal Reserve and other regulators have called impose automatic penalty interest rate "unfair and deceptive"--credit card issuers have increases on all balances, even if the account rapidly expanded their businesses and billed is not 30 days or more past due. The median cardholders tens of billions of dollars more per year. allowable penalty interest rate was 27.99 percent per year. In 2007, The Pew Charitable Trusts launched an effort, in partnership with the Sandler Foundation, to · 72 percent of cards included offers of low address growing concerns about abuses in the credit promotional rates which issuers could revoke card industry. The project team, led by a former after a single late payment. credit card company chief executive officer, researched consumer use of credit cards, conducted The Pew Charitable Trusts will be producing a series economic analyses of credit card practices and of reports in the near future detailing our research revenues, and closely reviewed hundreds of credit and ongoing trends of credit card practices. card products. In addition to this research and analysis, our team spent more than a year in Our process of research, analysis and outreach led to discussions with over 20 credit card providers and several key conclusions, including: consumer groups, with the goal of identifying balanced approaches to improving the safety of · Current credit card practices place American credit cards used by millions of Americans. As part of cardholders at risk of sudden, potentially our research, we looked at all general purpose drastic price increases which can seriously consumer credit cards offered online by the largest impair a household's stability and spending 12 issuers, which control more than 88 percent of power. outstanding credit card debt in America. As of December, 2008, this assessment covered more than · Credit card issuers' profitability can be 400 credit cards. sustained with the adoption of transparent and predictable pricing practices. Nick Bourke Project Manager Pew Safe Credit Cards Project Pew Safe Credit Cards Project | www.pewtrusts.org/creditcards
