New truthaboutcredit.org Website, Brochure Announced To Avoid Credit Card Hazards
Deceptive
credit card offers and practices are sinking more and more consumers
into high-cost credit card debt, according to a survey of 100 credit
card offers released today by the U.S. Public Interest Research Group
(U.S. PIRG). To fight the practices the report identifies, U.S. PIRG
also announced a new credit card education campaign featuring both the
website "truthaboutcredit.org" and a new brochure describing how
consumers can avoid credit card hazards.
"Credit
card companies aren't satisfied with a fair profit, so they're gouging
consumers with outrageous interest rates as high as 30% APR," said Ed
Mierzwinski, Consumer Program Director for U.S. PIRG. "But even worse,
credit card companies are deceiving consumers into paying unfair late
fees and burying deceptive conditions in the small print," he
continued.
Among
the key findings of the U.S. PIRG report, "The Credit Card Trap: How to
Spot It, How to Avoid It," are that credit card terms and conditions
are becoming less favorable to consumers; credit card marketing
practices are misleading and deceptive; and card marketing to college
students is too aggressive.
Deceptive and anti-consumer industry tricks exposed in the report and detailed online at www.truthaboutcredit.org include:
PUNITIVE
APR INCREASES: The survey found average penalty APRs-a higher interest
rate triggered by a late or missed payment-of 22.84%, nearly eight
percentage points higher than the average regular (non-penalty,
non-introductory) APR.
SKYROCKETING
LATE FEES: The survey found average late fees of $27.61. Credit card
companies are reaping more profit than ever before from late fee
income, for three reasons: (1) the average late fee has more than
doubled in ten years, (2) companies have decreased the amount of time
between when they mail a bill and when payment is due; and (3) nearly
two-thirds of companies have eliminated leniency periods, and have
begun to impose late fees immediately.
"Credit
card marketing has become reckless and deceptive, and sometimes
violates consumer protection laws," said Mierzwinski. "These deceptive
tactics are used by some of the country's largest card issuers and
affect millions of consumers each year."
Some
of the largest credit card companies have recently paid major
settlements and penalties in lawsuits by consumers and civil actions by
the government, for amounts ranging from $7-105 million. Alleged
practices include purposely posting monthly payments late in order to
increase cardholders' APRs and to gain more late fee income. For
example, Providian was found by the federal Office of the Comptroller
of the Currency and the San Francisco District Attorney to have
violated the Federal Trade Commission Act, which prohibits unfair and
deceptive practices, when it said a card had no annual fees, even
though mandatory monthly fees on the card totaled $156/year. The bank
agreed to settle the charges and had to pay consumer restitution of
$300 million.
While
Congress has failed to enact meaningful credit card marketing reforms,
it has worked overtime to pass a one-sided bankruptcy bill, noted
Mierzwinski. "The bankruptcy proposal that has passed both houses is a
poster child for campaign finance reform that will force indebted
consumers into draconian repayment plans they can't afford and don't
deserve, all for the benefit of the credit card banks that lured them
into debt in the first place," added Mierzwinski. "If the President is
truly a compassionate conservative, he will veto this bill."
The
report also included a survey of campus credit card marketing. "Credit
card companies target students because they hope to establish brand
loyalty with these young consumers at an early age," said Mierzwinski.
"But the credit card companies don't seem to care that some students
without jobs are falling into a credit card trap." Among the findings
of the state PIRGs' nationwide survey of 460 college students were that
nearly half of all students with one or more cards have paid a late
fee. The survey also found that one-third of students have applied for
a credit card at an on-campus table and that, of these, 80% cite free
gifts as a reason for applying.
In
addition to releasing the report, PIRG announced a new "Truth About
Credit" campaign, featuring a website - truthaboutcredit.org - which
includes a credit cost calculator and describes the worst hazards
credit card users face and what to do about them. U.S. PIRG also
released a new consumer brochure called a "Road Map to Avoiding Credit
Card Hazards." The calculator can also tell a consumer how long it will
take to pay off their balance if they only make the minimum payment.
For example, at a 15% APR, a $2000 unpaid balance and a commonly
required minimum payment of just 2% of the unpaid balance, it would
take 169 months to pay off the balance, even if you stop using the
card. "Never pay the minimum, always pay as much as you can afford,"
added Mierzwinski, "Or else you'll stay trapped on the high cost credit
card debt treadmill."
"We
urge Congress to pass tough legislation introduced by Rep. John LaFalce
(D-NY) to rein in unfair credit card practices," said Mierzwinski,
"Credit card companies are punishing consumers with deceptive practices
that must be stopped."
"We
urge consumers to shop around before accepting a credit card offer, and
read the fine print. Carry only one or two cards and if you can't pay
the balance in full, always pay as much as you can afford, but never
ever pay only the minimum balance requested."
