LowCards Weekly Credit Card Update September 28
Moms May Benefit From Credit Card Rule Fix
For certain moms with trouble getting plastic, help is on the way. A federal agency is aiming to fix a rule that’s making it difficult for spouses without their own incomes to get a credit card. A regulatory tweak eyed by the Consumer Financial Protection Bureau could make it easier for stay-at-home spouses to obtain credit cards in their own name as well as larger lines of credit. At issue is a controversial national standard requiring credit card companies to consider consumers’ independent income, rather than their household income, when they determine whether or not to extend credit. Many mothers, along with lawmakers who represent them, say the new standard, which went into effect in 2011, is unfairly crimping the ability of stay-at-home spouses, retirees and other consumers to obtain credit cards. But even authors of the credit card law say the Fed’s provision is too strict. Story by Maya Jackson Randall for the Wall Street Journal.
Discover to Pay $200 Million to Cardholders Over U.S. Phone Marketing
Discover Bank will pay about $200 million to cardholders who bought certain credit-protection products over the phone, as part of an agreement with U.S. regulators. The issuer of credit cards, which reached an agreement in principle with the Federal Deposit Insurance Corporation and Consumer Financial Protection Bureau, will pay an additional $14 million in penalties to be split between the regulators. Discover Financial said in January it had been notified by the FDIC and the CFPB over its marketing practices for fee-based protection products, such as balance protection. The company said it will refund money to cardholders who bought the products by telephone from December 2007 to August 2011. Story by Ashutosh Pandey for Reuters.
‘Free Checking’ Costs More
So-called free checking accounts are more expensive than ever, as the lumbering economy and new regulations squeeze bank revenues. To avoid a monthly fee, bank customers in the U.S. must keep an average minimum balance of $723 in checking accounts that pay no interest–up 23% over last year. The average monthly fee on noninterest checking accounts rose 25% to $5.48, also a record. Banks have raised fees on automatic teller machines, overdrafts and checking accounts for customers who don’t meet new standards tied to account balances or regular deposits. A public outcry last year over the prospect of new monthly fees for using bank debit cards forced big banks to retreat from the idea. But a soft economy, low interest rates and new government rules that followed the financial crisis are prompting banks to flex their muscles on existing fees. Revenue at federally insured banks and thrifts dropped 1.9% in 2011 to $652.71 billion, according to FDIC data. Maintaining checking accounts cost most banks $250 to $300 a year, according to industry estimates. Banks say new regulations have turned many of the accounts unprofitable. Story by Robin Sidel at the Wall Street Journal.
CFPB Finds Differences in Credit Scores
The credit score you purchase from a credit reporting agency may be very different from the score your lender sees. Lender’s scoring models place nearly one in five consumers in different credit categories, according to a new report by the Consumer Financial Protection Bureau. This means consumers can’t exclusively rely on the credit score they purchase from credit agencies to be an accurate indicator of the interest rate on the loan they will receive. The study found that the majority of consumers received credit scores that were similar across the different scoring models. The scoring models placed consumers in the same credit-quality category 73 to 80 percent of the time. However, scoring models placed consumers in a different category 19 to 24 percent of the time. This can mean a higher interest rate if the lender’s scoring model places you in a lower credit category. This can also affect impact your job search or application for an apartment because some employers, landlords, and even insurance agencies now use credit scores in their screening process. Story by Bill Hardekopf for LowCards.com.
What’s In Your Mobile Wallet? Not Much
Leslie Fiet wouldn’t mind if her customers paid for their sweet treats with a smartphone instead of cash or plastic. But in the eight months since the owner of Mini’s Cupcakes in Salt Lake City installed a device that can accept mobile payments, no one has tried it. “Nobody really has a mobile wallet,” Ms. Fiet said, referring to the digital replacement for traditional credit cards and debit cards that can be loaded into a phone and used for payment. Ms. Fiet’s experience highlights the many hurdles facing widespread adoption of mobile payments. Banks, merchants and technology companies have bet billions of dollars on the technology, but those investments likely will take years to pay off. Even early-stage winners in the race to devise a new standard for mobile payments, such as Google Inc., have barely made a dent in what is expected to be a giant market later this decade. The industry, which hasn’t settled on a single standard technology, was slapped with another setback this month when Apple released a new iPhone that doesn’t contain a computer chip that powers mobile payments. The move likely will delay the large-scale adoption of a closely watched technology called near-field communications, or NFC. What’s more, many consumers aren’t familiar with mobile payments, meaning that there will be a long learning curve for the technology to take hold. Story by Robin Sidel and Amir Efrati of the Wall Street Journal.
Restaurants Join Growing Opposition to Swipe Fee Settlement
Another major trade association has come out against the $7.25 billion settlement between some retailers and Visa and MasterCard over the interchange fees on credit card transactions. The National Restaurant Association announced that it is opposing this settlement because it fails to “fundamentally change a broken marketplace in which swipe fees are set” and prohibits merchants from filing subsequent lawsuits over the interchange fee. “There is concern that restaurateurs will continue to be negatively impacted by the unfair, non-transparent system that exists today,” said NRA President and Chief Executive Dawn Sweeney said in a statement. Story by Bill Hardekopf for LowCards.com.
Dodd-Frank’s Constitutionality Challenged by Three States
Three U.S. states have joined a lawsuit that challenges the constitutionality of the 2010 Dodd-Frank law that overhauled U.S. financial oversight and created the Consumer Financial Protection Bureau. The attorneys general of Michigan, Oklahoma and South Carolina are challenging a portion of Dodd-Frank that empowers the Treasury secretary to order the liquidation of failing financial institutions, according to a complaint filed in U.S. District Court for the District of Columbia. The states joined a suit filed in June by conservative think-tank Competitive Enterprise Institute, a Texas bank and a senior citizens group. Dodd-Frank, passed by Congress in response to the 2007-2009 U.S. financial crisis, gives regulators broad authority to oversee financial institutions. It has since drawn criticism from Republicans and industry groups who say the new regulations go too far and could strangle businesses and restrict credit. Republican presidential candidate Mitt Romney has pledged to repeal Dodd-Frank, but few see that promise turning into a reality. Story by Emily Stephenson for Reuters.
Cellphones are Eating the Family Budget
More than half of all U.S. cellphone owners carry a device like the iPhone, a shift that has unsettled household budgets across the country. Government data show people have spent more on phone bills over the past four years, even as they have dialed back on dining out, clothes and entertainment–cutbacks that have been keenly felt in the restaurant, apparel and film industries. The tug of war is only going to get more intense. Wireless carriers are betting they can pull bills even higher by offering faster speeds on expensive new networks and new usage-based data plans. The effort will test the limits of consumer spending as the draw of new technology competes with cellphone owners’ more rudimentary needs and desires. So far, telecom is winning. Labor Department data released Tuesday show spending on phone services rose more than 4% last year, the fastest rate since 2005. During and after the recession, consumers cut back broadly on their spending. Story by Anton Troianovski for the Wall Street Journal.
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 14.30 percent. One year ago, the average was 14.28 percent.