March 22, 2009
Credit card penalty rates move higher
U.S. consumers struggling with high penalty interest rates on credit card debt and tightened access to loans are fueling the economic downturn, advocates say.
Even as interest rates for credit cards declined on average to 14 percent last month, Consumer Action, an advocacy group, said penalty rates charged by lenders for late or missed payments have been raised to an average of 26.9 percent, The Washington Post reported Sunday.
(Credit card users) have been very much damaged by this economic downturn and tightening of credit and all the losses that their banks have faced,Bill Hardekopf, chief executive of LowCards.com, an independent review site, told the newspaper.
If you as a consumer do anything to increase your risk, you will probably very quickly be hit.
Such practices were targeted by sweeping new regulations approved by the Federal Reserve late last year, but the rules do not take effect until 2010, the Post reported.
It's the worst of all possible worlds, said Travis Plunkett, legislative director of the Consumer Federation of America.
We know that these practices are not justifiable, and yet federal regulators have given the credit card industry a year and a half to continue to use them.