Lenders have figured out many ways of extracting fees. Theres universal default , where a late payment on one card can trigger high penalty rates on every card you own. Theres the endless late fee , where your payments never catch up with the new penalties you re charged. Theres two cycle billing -too complicated to explain here, but which amounts to charging interest on balances that youve already paid. And retroactive price hikes, where banks impose higher rates on old balances as well as new ones. What other business can get away with raising the price of something you already purchased? says Travis Plunkett of the Consumer Federation of America.
These practices startle consumers who think such high fees and interest rates must be against the law. But the Supreme Court effectively deregulated credit card rates 30 years ago, and 10 years ago it deregulated the size of the fees a bank could charge. Prior to fee deregulation, late fees hovered between $13 and $15, says Robert McKinley of CardWeb.com, which tracks the business. Now they run from $30 to $40. Its out of control, he says. Banks know theyve pushed this too far.
This year, however, the new Congress started holding hearings. Suddenly Citi dropped universal default and JPMorgan Chase ended two cycle billing. But those are just gestures. Without fee caps or usury laws, were in the bankers hands.
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