Weekly Credit Card Update December 15
CONSUMER PROTECTIONS LACKING FOR MOBILE PAYMENTS
If you use your cell phone to make mobile payments, your level of protection against financial liability if something goes wrong will vary depending on your wireless carrier’s policies and your cell phone contract, according to a new analysis by Consumers Union, the advocacy arm of Consumer Reports. Consumers Union wants mobile payments to have the same guaranteed protections that debit and credit card transactions have, and ideally, would like to see the protections afforded to cell phone owners in California applied nation wide.
Story by Maggie Shader for Consumer Reports
NEW CREDIT REWARD DEALS: BONUS DEALS AND REWARDS ARE ENTICING, BUT WATCH OUT
Things are looking rosier for credit card holders. Consumers are paying down balances and facing fewer punitive actions by credit card companies such as higher rates, late-payment fees, and canceled cards, according to a nationwide survey by the Consumer Reports National Research Center. And with reports of delinquencies and defaults down, card issuers have resumed stuffing your mailbox with offers, many of them featuring low-rate introductory deals or lucrative rewards. New federal rules barring many abusive practices by card issuers seem to be having an effect. Only 12 percent of the 1,258 Americans surveyed in July said their credit card companies had generally treated them unfairly, down from 22 percent in 2009. More people are being approved: Only 14 percent were denied a card in 2011, compared with 24 percent last year. But that doesn’t mean you can let down your guard. Thirty-five percent of survey respondents said in the past year they had experienced at least one credit card problem, such as a new annual fee, higher interest rate, lower credit limit, or limits on rewards. Average interest rates on new cards were 14.11 percent in September, up from 11.64 percent in May 2009, according to LowCards.com.
Story in Consumer Reports
CFPB ASKS CONSUMERS FOR INPUT ABOUT CREDIT CARD CONTRACTS
When the fledgling Consumer Financial Protection Bureau recently collected consumer complaints about credit cards, one of the overarching themes was confusion over the terms of the cards. Whether consumers were complaining that their interest rate suddenly went up or that they were charged a penalty fee, it often came down to one thing: they didn’t understand the contract. And in credit card land, using the card constitutes agreeing to the contract, so you’re stuck. Now the Consumer Financial Protection Bureau has developed a prototype contract it thinks will simplify the whole mess. The average credit card contract is about 5,000 words long. The new CFPB one is a little over a thousand. It doesn’t do away with the fine print, necessarily. What it does is take all of the terms of art in the contracts and relegate them to a separate “definitions” page, so the lawyers will still be satisfied. By shunting that language elsewhere, the agreement itself can be written in plain English. In fact, the CFPB has consciously tried to write the new contract at an 11th grade reading level, to be as inclusive as possible. Inevitably, though, the new format will not be perfect or perfectly understandable. And that’s where you come in. The CFPB is asking members of the public to weigh in.
Story by Elisabeth Leamy for ABC News
OVERDRAFT FEES ON THE RISE
Overdraft fees are again taking a larger bite out of our pocketbooks. In July 2010, new regulations from the Federal Reserve required consumer consent for overdraft protection for ATM and debit card transactions. These overdraft regulations cost the banks billions of dollars in revenue, but the overdraft fees are increasing once again. Overdraft revenue fell for six quarters, but have now risen by $700 million in the second quarter of 2011, according to Moebs Services. In addition, the average number of overdrafts per household increased during the same period. Moebs found that 26 percent of consumer checking account holders intentionally overdraw their checking account. New research by the Pew Charitable Trust found that overdraft fee will cost Americans an estimated $38 billion in 2011.
CONSUMERS CRY FOUL OVER DEBT COLLECTORS
Complaints about debt collectors are pouring into a federal database that tracks allegations of illegal late-night phone calls, arrest threats and other abuse. The debt-collection industry, booming as many Americans struggle to catch up on their payments or walk away from what they owe, was the subject of a record 164,361 complaints through Dec. 8 of this year, according to the Federal Trade Commission. The total is 17% higher than the 140,036 debt-collection complaints the FTC got for all of 2010. The number of debt-collection complaints is surging even though the mountain of overdue bills is shrinking. As of Nov. 30, a total of $96.8 billion in auto loans, credit cards and other unsecured consumer-finance debt was at least 60 days past due, down 19% from $119.5 billion at the end of 2010, according to data from Equifax Inc. and Moody’s Analytics. Debt collectors are regulated under a patchwork of state and federal laws. U.S. oversight is shared by the FTC and Consumer Financial Protection Bureau.
Story by Jessica Silver-Greenberg for the Wall Street Journal
FREE CHECKING ISN’T CHEAP FOR BANKS
Despite a public perception that taking deposits is a can’t-lose business, maintaining a checking account costs banks between $250 to $450 a year. In many cases those accounts aren’t even turning a profit. The average checking account cost banks $349 in 2011, says Mike Moebs of Moebs Services Inc, a research firm. But the average revenue per account is just $268, implying a loss of $81. That equation helps explain the thinking behind some of the recent, highly-controversial steps banks have taken to raise the prices their customers pay for checking accounts.
Story by Victoria Finkle for American Banker
CITIGROUP SPENT $1.18 MILLION ON 3Q LOBBYING
Citigroup Inc. spent $1.18 million to lobby the federal government on new rules that affect its ability to trade complex Wall Street securities, cyber security, new housing rules and other issues in the third quarter, according to a recent disclosure report. That’s about 10 percent lower than the $1.31 million the New York bank spent in the second quarter, and about 12 percent lower than the $1.34 million it spent in the third quarter last year. Banks are heavily spending to influence new rules that govern the Dodd-Frank Act, which was passed last year.