Credit card companies said to be exploiting loopholes in federal law

Upcoming federal credit card reforms are intended to make debt management easier for people, but one consumer group is warning that lenders are already using a variety of tricks to continue maximizing their profits.

According to the Center for Responsible Lending (CRL), consumers are finding it very difficult to gauge the true cost of their credit card debt due to a variety of tricks aimed at replacing the more straightforward penalty interest rates and late fees that have become increasingly common in recent years.

For example, the center says that some emerging tactics by credit card companies include inactivity fees, minimum finance charges, extra fees for international transactions and higher fees on balance transfers and cash advances.

“The Credit CARD Act that Congress passed earlier this year was a big improvement for American families. But our research shows that industry keeps finding clever ways to get around meaningful reform, and we need a regulator focused on making financial products fair,” said Josh Frank of the CRL.

Another tactic apparently used in recent years by credit card companies has contributed to millions of consumers already paying significantly more for making a late payment. According to the center, credit card companies once maintained a penalty fee setup where a balance of $1,000 would be subject to a $35 late fee. Now, most cardholders are said to face the same size late fee if their balance is $250, which means that 90 percent of them are subject to the largest possible late fees.

The group also reports that the average credit card late fee now stands at $39. Late fees have also drawn criticism from consumer advocates when it comes to debit cards, with some previous media reports citing customers who paid high late fees for over drafting their accounts by less than a dollar.

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Consumer advocates are warning about newly emerging tactics by credit card companies.

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