Credit card issuers still hiking interest rates, have collected 10 billion since last year

If you have a credit card, a new study by a Washington based group confirms what most of you already know. Banks and credit card companies are still at it, i.e. increasing interest rates prior to the new credit card reform law taking effect. In fact, so much so, that the report by the Pew Health Group's Safe Credit Cards Project says "the most harmful practices have actually grown more widespread to the point that not one of the bank cards reviewed would meet the legal requirements outlined in the Credit CARD Act."

A previous report from the same group says that card issuers raised rates on nearly one-quarter of existing accounts, costing consumers a minimum of $10 billion dollars between 2007 and 2008.

According to the authors, the new 36 page report examines all consumer credit cards offered online by the largest 12 bank issuers in America. These banks control more than 90 percent of outstanding credit card debt nationwide. The report also reviewed cards offered by the largest credit unions. (The Pew Safe Credit Cards Project gathered data from July of this year on nearly 400 cards)

Here are just a few key findings:

1) 100 percent of credit cards offered online by the leading bank card issuers continue to include practices that will be outlawed once the legislation takes effect

2) Advertised credit card interest rates rose an average of 20 percent in the first two quarters of 2009, even as banks' cost of lending declined

3) 99.7 percent of bank cards allowed issuers to increase interest rates on outstanding balances - a jump from 93 percent in December

4) 95 percent of bank cards permitted issuers to apply payments in a way the Federal Reserve found likely to cause substantial financial injury to consumers

5) 90 percent of bank cards had penalty rate hikes which for the most part are imposed by "hair triggers" of one or two late payments in a year

The report says just a few months ago (in July) the median advertised annual percentage rates (APRs) for purchases on bank issued cards were between 12.24 and 17.99 percent, compared to a range of 9.99 to 15.99 percent in December 2008. The report says compared to last December, lowest advertised bank rates grew by more than 20 percent, while highest advertised rates grew by 13 percent.

According to a news release on the Pew Charitable Trust website, the report " also provides the first comprehensive comparison of bank cards to those issued by credit unions, based on advertised terms and conditions. The analysis showed that credit unions offered much lower APRs, less punitive penalty rates and engaged in far fewer unfair or deceptive practices than their commercial peers.

Nick Bourke, the manager of Pew's Safe Credit Cards Project says "when the Credit CARD Act takes effect next year Americans can expect to see safer, more transparent cards. How well the new law works, however, will depend significantly on how the Federal Reserve creates new rules (under the law) to protect consumers."

Reached by telephone, Bourke told me "I have to say I wasn't surprised that the unfair and deceptive practices are continuing. But, as a researcher, it is always shocking when you come up with the figure of 100 percent, no exception. Again, that's what we found, that every card issuer is doing this."

Bourke also told me that one of the things that did suprise him was the use of a new kind of interest rate formula, known as the "partially variable interest rate.' He says that's a rate that can go up with the change in the index, but he says "we found that the rate can't necessarily go down that much. There's a minimum that will always be charged, no matter how much the index may be fluctuating."

Bourke says the Pew Charitable Trust is a non-profit, non-partisan organization that tries to find "fact based solutions to challengiing public policy issues."

Much of the teeth in the new credit card bill is set to take effect in February. However, some in Congress are urging passage of those key provisions sooner. Bourke says he agrees with that call for urgency. " Our research supports accelerating the implementation of those consumer protections. Our report shows these unfair and deceptives practices continue to be widespread and people are being harmed by them."