Fed Clamps Down On Credit Card Loopholes

To shut down “fee harvesters” and other crafty tricks credit cards cooked up to escape the CARD act, the Federal Reserve has proposed three ways to tighten and clarify the rules.

1. The CARD Act say no no to fees over 25% of the credit limit in the first year the card was opened. Some cards have been avoiding this by charging a hefty “processing fee” that applied before the account was opened. So the Fed says wants this part of “Regulation Z” to also apply to any upfront fees.

2. Under the CARD Act, credit cards aren’t allowed to revoke promotional interest rates unless payment is over 60 days late. Some issuers got around this by turning the offer into some other kind of waiver or rebate of interest and feed, so the Fed has proposed that this rule applies to those as well.

3. When evaluating income to determine credit worthiness and credit limit, credit card companies should look at individual, not household income. So what happens when one partner is not working? They’re supposed to open a joint or authorized account with the breadwinner.

Hm, I could see that one leading to some “Staying together for the sake of the credit cards” relationship scenarios.

For the full run-down, check out the whole docket in the Federal Register.

Press Release [Federal Reserve]

Truth in Lending; Proposed Rule [Federal Register]
Fed Aims to Tighten New Rules for Credit [WSJ]
Federal Reserve Board Clarifies Some Credit Card Rules [Lowcards.com]


Edit Your Comment

  1. obits3 says:

    “When evaluating income to determine credit worthiness and credit limit, credit card companies should look at individual, not household income.”

    Now if only they would only choose to use the individual credit score so I don’t have to worry about the free credit scenario: See # 2

  2. Loias supports harsher punishments against corporations says:

    More power to them….literally?

  3. voogru says:

    Because this will fix everything.


    • Megladon says:

      You must be part of the “gop’s fix it completely or don’t even try” program. What ever happened to steps in the right direction? News flash its amazing anything positive got done the last 2 years with all the no votes, and yet not 1 person gop offered a suggestion on how to fix anything. Pout in the corner, we don’t care about you.

      • RvLeshrac says:

        The worst part is that we got watered-down legislation because they were trying to compromise and offer the GOP some of what they wanted. So now we have ineffective legislation AND no control.

        Next time, I hope they simply ignore the Republican protests completely, and ram through everything they want. Make them strap on the diapers and WORK for those filibusters.

    • Kate says:

      It did something. Why do you need the government to fix absolutely everything?

  4. pecan 3.14159265 says:

    “Regulation Z” should not be confused with “Resolution Z,” which deals with the emergency response plans for the inevitable zombie invasion.

  5. DerangedKitsune says:

    With the results of the latest election and the GOP proudly trumpeting that they’ll do anything to stonewall and make pests of themselves, I can see this going exactly nowhere. It was tough enough to get the CARD act through the first time, and the lobbiests have had plenty of oppertunity to shore up their support.

    • Loias supports harsher punishments against corporations says:

      I await the Dems being the opposition party and then listening to the GOP whine about it.

    • PLATTWORX says:

      Until the media stands up and yells “Excuse me, Republicans? YOUR LYING about…… ” they will continue to try and trick the people into thing they are our saviors, GW Bush was an amazing President and everything they proposed in the past is evil the moment Obama suggests it. Sadly, Tuesday showed american citizens are very gullible.

      • Loias supports harsher punishments against corporations says:

        I think it shows how fickle we are as well. Or how we pretty much always vote out whatever current party is in power when the economy is bas – regardless the causes.

      • TasteyCat says:

        I thought 2008 showed Americans were gullible. As far as I’m concerned, Americans got what they deserved. Now they’re angry about it.

      • wanpakumono says:

        it’s YOU’RE, not YOUR

        Must be a democrat thing

      • wanpakumono says:

        It’s “YOU’RE,” not “YOUR.”

        Must be a Democrat thing.

    • VeganPixels says:

      Entire CARD Act repeal in 3 … 2 … 1 Jan. 2011

    • TouchMyMonkey says:

      They’re talking about the Fed proposing clarifying regulations to the regulators in the executive branch (that is, the people who answer to the President, not Congress). Those only need the original CARD Act as justification.

  6. ARP says:

    Cat, meet mouse. Let the chase begin.

  7. TasteyCat says:

    Stupid poorly thought out bill. Go ahead and change the rules. They’ll find ways around the new rules, too. I don’t care either way since I pay in full, but it seems that the government just wants to find new ways of punishing responsible borrowers, making them pay for the failures of those who are not responsible.

    • qwickone says:

      How does this punish resp borrowers?

      • voogru says:

        They have to make money somehow. Credit cards are not a charity.

        • Geekybiker says:

          There are fees simply for using the card you know. The merchants are charged instead of us, and we get to pay higher prices to cover it. Its just not as profitable as misc fees. If they can’t offer credit to some people without the litany of fees, so be it.

          • RvLeshrac says:

            Merchants are also charged for those “3% Cash Back” things, as well. When you use a 1/3/5% “Cash Back” card to make a purchase, the merchant is paying an extra 1/3/5% fee for that charge. And they have no recourse, save refusing all cards.

          • RvLeshrac says:

            Merchants are also charged for those “3% Cash Back” things. When you use a 1/3/5% “Cash Back” card to make a purchase, the merchant is paying an extra 1/3/5% fee for that charge. And they have no recourse, save refusing all cards.

    • rndmnmbr says:

      Sorry, but you are indeed your brother’s keeper, like it or not.

    • Warren - aka The Piddler on the Roof says:

      “Go ahead and change the rules. They’ll find ways around the new rules, too.”

      Well said. And this is exactly why I don’t use credit cards. Even those who always pay off balances and use cards strictly for points sometimes get screwed by these ass clowns.

    • frank64 says:

      I normally think along your lines. However, here the banks went way overboard in how they treated people. There should have been more consumer outrage, but so many have been so conditioned just to accept it. The last straw was raising people rates on balances from past purchases to as much as 30%. I would have been OK with it if they only did it to future balances, and some banks gave borrowers no option. This was totally ridiculous, and I am not sure why they even thought they could get away with it, but they largely did. I can tell you if it happened to me I would have refused to pay. I did opt out of a Cit rate increase from 9.99% to 14.99%. I am paying off the card at the lower rate. I am perfectly OK, with that. They raised the price and lost my business. Fair, but some banks didn’t allow it, and other people where more concerned with what closing would do to their credit score.

      Anyway the law has really helped consumers and there has been no harm to “responsible borrowers” accept for some loss leader pricing by the banks. Luring in people with loss leader rates and hoping to ensnare them might have benefited some, but it is predatory and I reluctantly think gov action was needed. The banks have not been able to respond by making up the revenue elsewhere because they have reported a drop in earnings due to the law, and future revenue projections are lower. It was very good for the consumer.

    • peebozi says:

      Yes, it’s all about YOU! you poor, perfect borrower. i’m going to default on all of my credit cards and file bankruptcy now just to spite every miserable POS like you….I hope i raise your cost by $.05-$.10 per month!! muwahahahahahaha

      but seriously, how does this punish responsible card holders who don’t carry a balance and/or pay off their card every month?

  8. katarzyna says:

    “no to fees over 25% of the credit limit in the first year the card was opened.”

    That seems overly high. 25% of the credit limit, in fees? Wow.

    • Phil Villakeepinitrreal says:

      This is targeted at “starter” cards. THe ones with a $300 limit that are already loaded with $100+ in fees charged just to open the account, with various silly names.

      • frank64 says:

        So, they can just raise the limit to 4 times the fee they want, and reduce the limit later for some reason.

  9. Mark S says:

    My wife is a stay-at-home mom and has 2 credit cards in her own name (that she had from before we were married). So, according to #3, the credit card companies will close her accounts because she has zero income unless she adds me to the account? That’s ridiculous.

    • pecan 3.14159265 says:

      But if they determine individual vs. household income by using taxes, won’t you be able to get around that by filing jointly? Doesn’t that basically say that your income is both of your income?

      • sprybuzzard says:

        They may require or request pay stubs as proof of employment. That was a good point brought up that I hadn’t thought of.

  10. Rena says:

    Nice to see regulations actually trying to close loopholes.

  11. gman863 says:

    Aside from my first car loan (while in college) and mortgages, I have never had a lender attempt to verify my income by asking for pay stubs, tax returns or by calling my employer.

    Credit card companies base decisions totally on FICO scores and payment history. When I worked in big-ticket retail and processed store credit card apps, calling the lender and asking for a manual review of a declined application was practically useless. Unless there was an error on the initial credit report used (Equifax, TransUnion) and another company’s report was pulled with a much better score, “No” meant exactly that.

  12. EyeintheLAsky says:

    Uhhhhhh, the Federal Reserve is a private banking cartel…about as “Federal” as Fed-Ex…NOT a Federal agency.

    Their long-term goal is to get more of Americans’ money into their pockets.

    This would be like allowing pedophiles to determine where elementary schools should be built in a given community.

    • RvLeshrac says:

      Congress is free to directly order the actions of the federal reserve at any time they choose to do so.

  13. Blious says:

    How dare the government step in! Keep them out! Let companies screw consumers and trick them into THOUSANDS of extra dollars!