Those actions include activities as widespread as a class action lawsuit and as limited as a single person filing a complaint against her credit card issuer. Meanwhile a Senate committee has called on executives from a number of credit card companies to answer for some of their outrageous fees.
A lawsuit, which is awaiting class action certification, was filed against Wells Fargo last November for its credit card practices. The suit seeks damages, reimbursement for fees, and a demand that the credit card company stop charging its customers hidden fees. One man, who could become the class representative, was given a "College Visa Credit Card account" when he was 18 years old. He racked up numerous fees by going over-limit on his credit card; however his lawyer is arguing that charging a $10 fee for being over-limit by as little as one cent is unreasonable.
In another case of consumers taking matters into their own hands, a woman reported to her local newspaper that she was slammed with extra charges not because she was late with a payment or went over her limit but because she went over 50% of her credit limit. The woman told the Times Herald-Record that her interest rate jumped from 7.9 percent up to 29.9 percent.
The woman then phoned Chase, her credit card issuer, and was told that even if she lowered her balance she would still have to pay the higher interest rate. In response, the woman paid the balance in full and closed the account. She then filed complaints with the Federal Trade Commission and the Office of the Comptroller of the Currency. The bank later sent a check to repay her.
Some credit card practices are starting to change, but that may just be a response to government investigations into industry practices. The Senate's Permanent Subcommittee on Investigations recently summoned a number of credit card companies to Congress in January and March where they had to face at least one customer who was subjected to cruel treatment from Chase.
The man, Wesley Wannemacher, said that he charged $3,200 on a $3,000 credit card. Because of going over-limit he was charged $4,900 for interest, $1,100 for late fees and $1,500 for over-limit fees. Despite being over his limit a total of three times he wound up pay 47 over-limit fees. By the beginning of March he had paid $6,300 on his credit card but still owed $4,400 before Chase decided to forgive his remaining debt. This means that the credit card company felt that he should pay $10,700 on a $3,200 debt.
Senator Carl Levin released a US Government Accountability Office (GAO) report that analyzed various aspects of the credit card industry including fees and interest rates. He also chaired the most recent hearing into the credit card industry, at which various companies were called to speak before a subcommittee. The results of Levin's investigation into grace periods, fees, and interest rates would probably surprise a lot of people.
When the subcommittee investigated grace periods they found that most credit card companies only provide a grace period to cardholders who pay their balances in full each month. If the entire balance is not paid in full, every purchase begins accruing interest from day one. Most consumers believe that they always have a grace period (that is, a period of time after a purchase is made before interest begins to accrue).
The subcommittee also investigated interest rates and found that credit card companies often have numerous interest rates for one credit card including one rate for cash advances, a different rate for purchases, yet another rate for balance transfers, and still another to penalize the cardholder for paying late or being over-limit.
Finally, the subcommittee investigated fees including late fees and fees for being over a credit card limit. As mentioned before, Mr. Wannamacher went over the limit on his card three times totaling $200 but paid 47 over-limit fees totaling $1,500.
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However, Chase only made its offer to forgive Mr. Wannamacher's remaining balance after he agreed to testify at the subcommittee's meeting. And it is not yet clear if companies other than Citigroup and Chase will change their practices. People who have credit cards with other companies or who have been stuck with ridiculous fees and do not have the opportunity to speak before a subcommittee will still be stuck paying all of the fees that have accrued so far. In many cases, they wind up paying far more than they originally owed.