“Americans do not deserve to be pushed down the economic ladder by credit card companies. It’s wrong, it’s unfair, and it must end. The CARD Act will protect Americans by bringing an end to wrongful credit card practices and helping to provide consumers with a fair chance to secure economic security in their futures.” – Senator Christopher Dodd

The whole idea behind passing the credit card act was to put a stop to consumer abuse by the credit card companies. Mainly, it was to stop credit card companies from raising rates and changing the terms and conditions of a consumer agreement for any reason. It was also designed to stop abuses such as how they allocate payments.

For example, if you had a 25% interest rate on some of your credit card debt and then 0% on another part all in the same account, they would apply your payment only to the 0%, allowing the higher interest rate debt to continue to grow. The politicians have touted this act as a stop to consumer abuse.

The proof is in the pudding. As I have stated, the credit card act is full of loopholes. Let’s read some of the language from actual credit card agreements that are post February 22nd credit card legislation enactment.

From a Capital One agreement:

Can you increase my interest charges and fees? - We may increase your interest charges for new transactions and your fees after the first year of the account…..We may change any other terms of your account at any time.

Not much has changed there…

How do you apply my Payment? – As of 2/22/10, we will apply your minimum payment to pay off lower-rate balances before paying off higher-rate balances. We will apply any portion of your payment in excess of your minimum payment to higher annual percentage rate balances before lower ones.

Since most people just pay the minimum, nothing really has changed there either.

Wells Fargo terms and conditions agreement:

Please note that if an account is opened, the terms of your account, including any of the APRs (interest rates), are subject to change.

If the politicians were really offering up consumer protection, credit card companies would not be allowed to raise rates or make changes for any reason. Further, all of the payment would be applied to higher rate debt. For all of the political grandstanding and “outage” concerning the abuse, this is not much of a solution. The good news is that the credit card industry with clear conscious can continue to shoveling campaign dollars to help their friends get re-elected.

Tags: Bob Brooks, Capital One, Credit CARD act, Credit Card Companies, Debt, interest rates, Senator Christopher Dodd, terms and conditions, Wells Fargo