‘Predatory’ card fees shackled

Huge charges for late credit card payments, fees for the under-use of cards and inexplicable interest rate rises were banned in the United States this week in a sweeping crackdown on predatory tactics by the Obama administration.

As part of its Credit Card Reform Act, the US government capped penalties for late payment at $25 — or at the cardholder’s minimum required repayment if lower — to end a practice of hefty fees for tiny billing infractions. Under the new rules, credit card issuers are required to give 45 days’ notice of any rate rise and must provide a reason for any changes.

Cardholders get an option to cancel their account if the cost changes. Interest rates must not rise during the first 12 months of a new account and fees will no longer be levied on people just because they failed to use their cards sufficiently.

For US consumers, the crackdown is the most tangible result of the White House’s efforts to reform the financial services industry, which led to a battle with Wall Street and a long wrangle in Congress amid the fallout of the global financial crisis. The American Bankers’ Association said it backed the regulations, but experts fear a possible rise in rates as card issuers make up for the loss of lucrative loopholes.

Moshe Orenbuch, a banking analyst at Credit Suisse, said that previously a small number of customers had unwittingly paid for “all the sins of cardholders” but “what the industry is doing is taking that cost and spreading it over all customers, as opposed to a smaller number”.


Consumer advocates have praised the measures for increasing visibility for cardholders. “Consumers are finally going to know what they’re paying for,” said Susan Weinstock, the director of financial reform at the Consumer Federation of America.

At the height of the credit crunch, punitive interest rates on US credit cards rose as high as 29.9%. Card issuers have been criticised for quietly raising the rates of customers with the worst credit records, who tend to be the most vulnerable.–

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Andrew Clark
Guest Author

Related stories

Advertising

Subscribers only

How lottery execs received dubious payments through a private company

The National Lottery Commission is being investigated by the SIU for alleged corruption and maladministration, including suspicious payments made to senior NLC employees between 2016 and 2017

Pandemic hobbles learners’ futures

South African schools have yet to open for the 2021 academic year and experts are sounding the alarm over lost learning time, especially in the crucial grades one and 12

More top stories

Egypt, Seychelles get first jabs

The two countries have rolled out China’s Sinopharm vaccine, but data issues are likely to keep some countries from doing the same

Fashion’s future is bricks and clicks

Lockdown forced reluctant South African clothing retail stores online: although foot traffic in brick-and-mortar stores remains important in a mall culture like ours, the secret to success is innovation

What the Biden presidency may mean for Africa

The new US administration has an interest and much expertise in Africa. But given the scale of the priorities the administration faces, Africa must not expect to feature too prominently

Zuma, Zondo play the waiting game

The former president says he will talk once the courts have ruled, but the head of the state capture inquiry appears resigned to letting the clock run out as the commission's deadline nears
Advertising

press releases

Loading latest Press Releases…