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Credit Card Abuse Still Exists, Despite the Credit CARD Act

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Boston, MAAlthough it has been two months since the Credit CARD (Card Accountability, Responsibility and Disclosure) Act went into effect, there are still cases of credit card abuse that consumers must deal with. The Credit CARD Act was meant to limit instances of abusive practices by credit card companies, but some loopholes exist that allow companies to get away with treating customers poorly.

The good news is that credit card companies will no longer be allowed to automatically allow a card to go over-limit. The only way a purchase can put an account over its limit is if the customer has previously requested that the account be permitted to do so. Even in these situations, customers still face fees when the credit card account goes over-limit.

Fewer overdraft fees—as well as fewer late fees—mean credit card issuers are looking to make up lost revenue by increasing other fees. Customers have an opportunity to opt out if they are not happy with fee increases, but there are rules to opting out.

For example, lenders can raise interest rates one year after a credit card account is opened if they give the cardholder 45 days' notice. Customers can cancel their card to avoid paying that rate, but if the card is used more than two weeks after the notice is sent, the customer will be charged the higher interest rates on those purchases.

Some card companies are also eliminating the grace period (the time after a purchase during which interest is not charged on the item). This means that customers will be charged interest immediately after the purchase is made. Furthermore, some companies reportedly canceled their customers' credit card accounts or, according to NPR on 4/15/10, paid some customers $300 to close their accounts.

Meanwhile, a lawsuit reportedly filed against Citigroup alleges that the plaintiff's marital status resulted in her credit limit being reduced. According to the Forbes blog on 4/23/10, Pamela Brinson filed the lawsuit after she learned that her credit limit had been reduced from $6,700 to $1,520. When she called Citigroup, a customer service representative told her that her "marital status" was a reason her limit was reduced.

Brinson's lawsuit notes that she has no spousal income and lives on less than $700 a month, but she says that was not a problem for Citigroup until several months ago. A judge found that Brinson has a case under the Equal Credit Opportunity Act, which prohibits creditors from discriminating based on marital status or other factors.


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