LowCards Weekly Credit Card Update October 5
U.S. Credit Card Lenders Shun Add-Ons as CFPB Cracks Down
Chase, Bank of America and American Express are among credit card lenders retreating from a $2.4 billion market as regulators seek curbs on deceptive marketing of products including debt cancellation. Scrutiny from the Consumer Financial Protection Bureau has led to fines against banks including Capital One and Discover Financial Services, prompting them to curtail sales of so-called add-ons that offer to help customers pay card bills if they get sick or lose their jobs, or monitor their credit. The crackdown is CFPB Director Richard Cordray’s first enforcement campaign after the Dodd-Frank Act consolidated regulation of retail financial products under one federal agency. With U.S. banks already complaining that regulation has squeezed revenue, the bureau is considering new limits on payday lending and fees for checking overdrafts, and has proposed an overhaul of mortgage practices. Story by Carter Dougherty for Businessweek.
Credit Card Delinquencies Reach 11-Year Low
More Americans are making their credit card payments on time. Credit card delinquencies fell to 2.93 percent in the second quarter, the lowest level since 2001, according to the American Bankers Association. This marks the first time the rate has been below 3 percent in that 11-year period. The rate is down from 3.08 percent in the first quarter. A delinquent account is
any credit card account that is 30 or more days overdue. Paying their bills on time means cardholders are more financially prudent, avoiding late fee charges. It may also be an indication that consumers are in better financial shape as the holiday shopping season begins, a time when spending and debt usually increases. Story by Bill Hardekopf for LowCards.com.
Credit Card Swipe Fee Settlement Far from a Done Deal
The final approval of a proposed multi-billion dollar legal settlement over credit card “swipe fees” could be in jeopardy–or at least delayed–by more legal wrangling. Six of the 19 plaintiffs in the case, all big trade groups, now say they oppose the $7.25 billion deal reached in mid-July. The antitrust lawsuit, filed back in 2005, alleges MasterCard and Visa conspired with some of the largest banks in the country to set the swipe fee a merchant must pay every time a customer uses their credit card. The six retail organizations who brought this case say they’re against the proposed agreement because it does not prevent Visa and MasterCard from boosting swipe fees whenever they want. Story by Herb Weisbaum for NBC News.com
Discover Financial Profit Beats As Consumers Spend More
Discover Financial Services’ third-quarter profit handily beat Wall Street estimates as more Americans used its credit cards, highlighting improving consumer sentiment. U.S. credit card loans fell during the financial crisis as people paid down debt and cut back on purchases. But a brightening job market is now encouraging consumers to spend. Consumer confidence in the United States jumped to its highest level in seven months in September, a private sector report showed earlier this week. Discover Financial said credit card loans rose 4 percent to $48.1 billion, on top of a similar rise in card sales volumes. Story by Jochelle Mendonca for Reuters.
Lawyers Get Rich Off Consumer Bureau
As the government’s consumer watchdog cracks down on banks, debt collectors, student lenders and other financial players, law firms are stepping up to protect them–and profiting nicely as a result. Since it was first launched a little over a year ago, the Consumer Financial Protection Bureau has proposed new rules for mortgage lenders and credit card issuers, and has gained supervision over large banks, credit unions, payday loan companies, private student lenders and credit reporting agencies. In the past few of months, it has taken two big enforcement actions against credit card issuers. Ballard Spahr’s Alan Kaplinsky likened the CFPB to a “three-headed monster,” with a regulatory head that makes new rules, a supervisory head that examines the books of financial companies, and an enforcement head that cracks down on companies. Ballard Spahr’s CFPB team helps about 125 clients fend off these three “heads”–which is especially crucial for nonbank companies like private student lenders and payday lenders since they have never been subject to ongoing federal supervision before. Story by Blake Ellis for CNN.
Consumer Reports Money Lab Puts 53 Credit Cards to the Test
To help you make sense of the wide range of credit card deals, the Consumer Reports Money Lab developed a computer model for evaluating cards. It takes into account the total costs of carrying and transferring a balance and estimates the rewards you stand to earn based on your spending patterns. We tracked down the terms of 53 mass-market credit cards and used the calculator to determine the best ones for three types of users: families looking for cash rewards, leisure travelers who want free trips, and cardholders who carry a balance. Story in Consumer Reports.
Supreme Court Hears Case Against Government for Credit Card Violation
The U.S. Supreme Court heard oral arguments that question whether the federal government can be held liable for money damages for violating the Fair Credit Reporting Act. The case, United States vs. Bormes, originated when a lawyer, James Bormes, paid an online filing fee on a government website and his receipt displayed his credit card number and expiration date. This is a violation of the Fair Credit Reporting Act. Bormes originally filed a class action suit in an Illinois district court, seeking punitive and statutory damages, but the case was dismissed. But Bormes appealed to the Federal Circuit which found in Bormes’ favor. The government argues that Congress did not stipulate that people can sue the government for these types of violations. Story by Lynn Henderson for LowCards.com.
U.S. Mortgages Not Likely to be Affected by LIBOR Proposals Soon
A proposal to revamp the London Interbank Offered Rate, or LIBOR, could restore some confidence in the global interest rate that is widely used for bond yields and mortgage rates in the U.S. The British regulator, the Financial Services Authority outlined a 10-point plan on Friday that proposed new regulation of the rate, including taking away responsibility from the British Bankers’ Association, which oversees it. The British bank, Barclays, and other U.S. and British agencies have admitted to submitting false information that is used to set the LIBOR. The BBA sets the LIBOR each morning with estimates from several global banks regarding what it costs them to borrow. It thereby affects trillions of dollars in contracts around the world, including mortgages and consumer loans. The LIBOR has had wide implications for U.S. homeowners, who may even have an adjustable mortgage rate directly tied to it. For example, some mortgage rates on an adjustable rate basis, whether for a duration of 10 or 30 years, sometimes have an adjusted yield above the LIBOR. Any LIBOR changes would directly be transmitted to borrowers. Story by Susanna Kim for ABC News.
LowCards.com Weekly Credit Card Rate Report
Based on the 1000+ cards in the LowCards.com Complete Credit Card Index, the average advertised APR for credit cards is 14.32 percent, identical to last week. Six months ago, the average was 14.33 percent. One year ago, the average was 14.27 percent.