The CFPB will forward the complaint to the financial insitutition within 48 hours. Within 10 calendar days of receiving the complaint, the financial institution is expected to investigate and resolve the matter. After the complaint is closed, the consumer will receive notification from the CFPB. It is not, however, the intention of the CFPB to mediate any disputes.

In addition to taking customer complaints, the CFPB has a number of other core responsibilities, including:

• Conduct rule-making, supervision, and enforcement for Federal consumer financial protection laws
• Restrict unfair, deceptive, or abusive acts or practices
• Promote financial education
• Research consumer behavior
• Monitor financial markets for new risks to consumers
• Enforce laws that outlaw discrimination and other unfair treatment in consumer finance

For more info, see www.consumerfinance.gov.

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Have a Credit Card Complaint? New Gov’t Agency Could Help

Sometimes, however, good intentions can result in inconvenient consequences.

In order to better gauge whether a borrower can repay their debt, the Fed has insisted that credit card applications can no longer request a consumer’s “household income.” Instead, issuers must ask for the borrower’s individual income or salary, to better evaluate their ability to repay the debt. Issuers must not only ask for this information before opening a new credit card account, but also when increasing the credit limit on an existing account as well.

What does this mean for married stay at home moms (and dads)? Under the current provisions, if no income is present, a co-signer is required. That means, if nothing else, that married homemakers with no income will become increasingly dependent upon their spouses.

It does not necessarily mean that the homemaker will be denied credit altogether, though there will certainly be more hoops to jump through. In addition to salary, issuers may also consider interest or investment income, retirement benefits, etc. as well as the consumer’s credit history to determine their creditworthiness.

Other ways to get credit
The suggested amendment takes effect October 1, 2011, so if you are a homemaker without income, you should have plenty of time to apply for credit in your own name while using your household’s income. The income requirement does not apply to existing credit card accounts, so any lines of credit that you have in your name before then shouldn’t automatically be taken away.

Another alternative is to become an authorized user on someone else’s account. An authorized user is someone who has a card in his or her name and has full charging privileges, but is not liable for the debt. As the credit account will usually appear on your credit report, this is also an excellent way to establish or rebuild your credit history.

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No More Credit Cards for Stay at Home Moms?

• Increased their monthly spending by an average of $68 during the first quarter of enrollment, and by $76/month over the first 9 months
• Paid off their balances more slowly, resulting in card debt increasing an average of $115 during the first quarter
• Moved spending from their other credit cards to their new rewards card

Admittedly, the study was limited in scope, as it only examined data from a single domestic bank over the period of nine months. Still, it suggests that even a modest 1% reward is enough to significantly alter consumer behavior to the bank’s benefit.

Extrapolating further, it’s possible to see how even more generous rewards could theoretically still be financially viable. As long as there are consumers falling into this “rewards trap,” by increasing spending and debt in response to a rewards program, you can count on banks continuing to put out the bait. It would be wise to remember that cashback and rewards cards are only truly “good” if you pay off your balance every month.

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Are Credit Card Rewards Programs In Danger of Going Away?

We may not be seeing many of these changes anytime soon, however. American Express has decided to fight these changes, so any merchants who still accept Amex will still be bound to their terms that prohibit them from discouraging the use of Amex cards. At any rate, this is a development that bears watching.

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Getting a Discount for Using No-Frills Credit Cards?

• Prohibits credit card issuers from charging a penalty fee of more than $25 for paying late or otherwise violating the account’s terms unless the consumer has engaged in repeated violations or the issuer can show that a higher fee represents a reasonable proportion of the costs its incurs as a result of violations.
• Prohibits credit card issuers from charging penalty fees that exceed the dollar amount associated with the consumer’s violation. For example, card issuers will no longer be permitted to charge a $39 fee when a consumer is late making a $20 minimum payment. Instead, the fee cannot exceed $20.
• Bans “inactivity” fees, such as fees based on the consumer’s failure to use the account to make new purchases.
• Prevents issuers from charging multiple penalty fees based on a single late payment or other violation of the account terms.
• Requires issuers that have increased rates since January 1, 2009 to evaluate whether the reasons for the increase have changed and, if appropriate, to reduce the rate.

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Fed Bans Inactivity Fees on Credit Cards, Caps Some Penalties

More than 300 card agreements are represented on the site, as all issuers who have more than 10,000 accounts are required to submit this information and update it quarterly. Each agreement contains general credit terms and conditions, along with fee and pricing information. If you need to find your agreement, the database allows searches by issuing bank, which you can usually find on the back of your credit card or your monthly statement.

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Fed Makes Credit Card Agreements Available Online

These settlements are hailed as a victory for credit card users, as many consumer advocates have viewed the arbitration process as being unfairly biased towards the credit card companies.

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Cap One, Bank of America Drop Mandatory Arbitration Clauses

Pick-a-rate: Up until now, a variable rate card was usually tied to the prime rate on the last day of the last billing cycle. CRL’s report shows that a number of issuers now have added language to select the highest prime rate within a 90-day period. The change may seem innocuous enough but CRL estimates it currently costs Americans an additional $720 million a year.

Variable rate floors: A practice that seems to be spreading, this clause stipulates that a variable interest rate cannot go down from the initial rate when an account is opened, but can go up.

Minimum finance charges: Consumers with only a penny in finance charges get charged a minimum amount up to two dollars.

Compression of balance categories in tiered late fees: While late fees have traditionally been imposed on a sliding scale, with a larger flat fee charged for a larger total balance, issuers have been steadily lowering the tiers, such that the balance required to trigger the largest fees has been significantly decreased.

Inactivity fees: Issuers charge consumers for not using or closing their account, with fees as high as $36/year.

International transaction fees: Issuers are increasing charges for transactions in foreign currency and expanding the definition of foreign transactions to include those in dollars.

Balance transfer/cash advance fees: This change has been obvious for anyone following credit card deals. Larger minimum balance transfer fees and percentages are proliferating. Most balance transfer fees are now also uncapped.

The CRL’s full report can be found here.

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New Credit Card Abuses Spread in Advance of Credit CARD Act

For all borrowers, greater than 40% of banks also expected to raise annual fees and minimum credit scores for prime borrowers.

On a positive note from a trending perspective, the number of banks tightening underwriting standards for credit cards fell to 15% from the 35% in the July survey, the lowest percentage since April 2008.

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Surprise, Surprise: Banks Admit to Tightening Credit in Response to Credit CARD Act

• Nearly twice as many customers reported an interest rate increase in 2009, up to almost 20% of all surveyed
• Almost one-fourth of customers who carry a balance reported an interest rate increase in 2009
• 14% of customers reported a late payment fee, up from 11% in 2008

According to JD Power, more than 9,000 credit card users participated in its survey between May and June 2009.

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JD Power Finds Amex Tops in Customer Satisfaction Again

• Issuers must give 45 days of warning before rate or fee increases, instead of 15 days
• Statements must be mailed 21 days in advance of the bill’s due date, instead of 14
• Banks must also give consumers the choice of opting out of rate increases by canceling their accounts and paying off their existing balances at the old, lower rate.

The remaining provisions are set to become effective next year.

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First Phase of New Credit Card Law Takes Effect Today

It’s unclear whether the withdrawal of these large arbitration firms will open the door for customer lawsuits. From a practical standpoint, though, some experts say that no other arbitration firm is large enough to pick up the slack to replace the case load of the firms leaving the field, so by default arbitration will become a scarcer option.

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The Exodus of Credit Card Arbitration Firms

The new law, which was signed in May, with most of its provisions taking effect in February 2010, makes it much more difficult for issuers to change interest rates unless the card has a variable rate. For example, under the new rules, interest rates can’t be changed during the first year after a card is issued. The exception is if the card has a variable rate. In addition, the interest rate on existing balances also can’t be raised, unless the card carries a variable rate at the time the law takes effect.

The fact of the matter is that under the new rules, fixed rate credit cards are much riskier products for issuers. With the card industry facing mounting losses and chargeoffs, coupled with the specter of the recently proposed Consumer Financial Protection Agency, that makes the future of fixed rate cards uncertain at best.

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Are Fixed Rate Credit Cards Doomed?

While they are reluctant to admit it, this sobering backdrop has caused banks to switch up their strategies. Card companies are now increasingly willing to negotiate with consumers who have outstanding delinquent balances, in an attempt to salvage at least a part of what they are owed.

Let’s make a deal
Many issuers have now empowered front-line call center representatives with the ability to cut deals with cash-strapped borrowers. Sometimes, the bank is even the one who will initiate the call.

Not for everyone
Settlement deals, however, are not available for everyone. Borrowers who appear to have the least ability to pay are the likeliest to receive an offer. And there are significant downsides:

• Settlement deals will still seriously harm a consumer’s credit record and
• you’ll also need to pay taxes on the amount of debt that is forgiven.

Overall, though, negotiated settlements are almost certainly a net positive for borrowers, assuming that they can come up with the money. The taxes owed will be substantially less than the amount forgiven and the settlement also prevents the bank from suing over the debt.

This post is from Credit Card Watcher, where you'll always find the best credit card deals.

Have Credit Card Debt? It’s Time to Make a Deal

Interest rate increases – Issuers can generally only raise rates on existing credit card debt if consumers are more than 60 days in arrears. Also, interest rates cannot be raised during the first year of an account.

Penalty fees – Under most conditions, charging an over-the-limit fee will be banned.

Marketing to college students – Issuers won’t be able to extend credit to those under 21 without first verifying their ability to pay or getting their parents’ permission.

Other fees – Retroactive rate increases for customers in good standing will be banned on existing balances. Rate increases for new charges are not allowed without at least 45 days’ notice. In addition, “double cycle billing” and “universal default” are banned.

How payments are applied – If your card has balances at more than one interest rate, payments must be applied to the highest interest rate first.

Bill payment – Bills can be paid online or over the phone without incurring a processing fee. Credit card statements must be mailed out at least 21 days before they are due.

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Obama Signs Credit Card Reform Bill

No Legislative Relief in Sight
Many consumer advocates see this wave of rate and fee hikes as an attempt by banks to preempt the ramifications of the rules announced by the Federal Reserve set to take effect in July 2010. In light of these recent increases, a few legislative changes have been proposed by Congress, including an emergency rate freeze on credit cards and an amendment to the now-delayed Credit Card Holders’ Bill of Rights that would cap credit card interest rates at 18 percent. Neither of these changes, however, are likely to see the light of day.

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Banks Continue to Hike Rates, Fees

While Heartland says that it has closed the security hole, it is not yet known the extent of the data that was taken. Since Heartland processes 100 million transactions per month, the number of affected consumers could be huge. (Read more details in the Forbes article.)

This latest news is just another reason to monitor your monthly statements closely.

This post is from Credit Card Watcher, where you'll always find the best credit card deals.

Massive Theft of Credit Card Numbers Reported

• Interest rate changes — Issuers cannot increase rates “unless expressly permitted.” Issuers can increase the interest rate after a specific period, provided that the rate was disclosed when the account was opened. Once an account is more than a year old, the interest rate for new transactions may be increased, but must be accompanied by a 45 day advance notice. The interest rate on existing balances may be increased if a borrower is more than 30 days late. “Universal default,” where an issuer can take adverse action based on your payment history with other accounts, will be eliminated.
• Reasonable time to pay — Banks must make sure that monthly statements are mailed or delivered at least 21 days before the due date.
• Payment allocation — When there are balances on an account at different interest rates, amounts in excess of the mininmum payment must be applied using one of two methods: either the excess payment must be applied to the highest interest rate balance or proportionately to all balances.
• Double-cycle billing — This practice, where charges can accumulate based on balances from previous billing cycles, becomes prohibited.
• High-fee subprime cards — Any cards that charge fees that consume most of the available credit within the first year will be banned. Fees exceeding 25% of available credit must be spread over no less than the first six months that the account is open.
• More readable statements — Statements should have more “plain” language with more readable formatting.

With these changes, it’s reasonable to expect that credit card issuers will need to find new profit centers to offset their loss in revenues. That could translate into higher fees. Since the value of acquiring a customer should also drop, I’d also expect fewer and less valuable sign-up incentives. The new rules regarding subprime cards will almost certainly make it more difficult for borrowers with poor credit to get a credit card, but given the predatory practices that some of the subprime lenders have been employing, that is arguably a good thing.

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Feds Approve Rule to Curb Unfair or Deceptive Credit Card Practices

As the end of the year nears, it’s especially important to carefully read your credit card statement, as issuers are cramming all sorts of new changes to your agreement–with many of those changes resulting in increased rates and fees. Here are a few of the recent changes I’ve noticed in my agreements:

Increased forex fees
At the same time that American Express sent notice that it would no longer allow balance transfers and convenience checks, it also noted that it would increase its fees for transactions made in foreign currencies. As of January 11, 2009, the foreign exchange fee will be increased from 2% to 2.7%.

Higher late fees and balance transfer fees
I also noticed that Pentagon Federal Credit Union plans to hike a number of its fees beginning January 1. Its late fee will rise from $33 to $39, it will introduce a default APR of 17.99% (where it previously had none) and will increase its balance transfer fee from 1% to 2.5%.

Penalizing those with life of balance offers
Chase has indicated it will begin charging some customers who have carried a balance for more than two years (primarily those with large balances at promo-rates) a $10 monthly fee and increase their minimum payment to 5% from 2%.

Taking an informal poll, have you noticed any recent fee or rate hikes on your cards?

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Ring in the New Year… with More Credit Card Fees

It will carry a $1000 annual fee, a $50,000 credit limit and access to a full-time personal manager. The bank plans to issue a total of 1000 of the cards to its best VIP customers.

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Foreign Bank to Issue a Diamond Studded Credit Card

The Fed just released its October 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices which showed that banks have been progressively tightening their lending standards and have now begun to cut credit limits on existing credit card accounts even for prime borrowers.

Banks less willing to lend
Of responding domestic banks, nearly 60 percent indicated that they had tightened lending standards on credit card loans over the past three months. About 50% reported that they had raised the minimum required credit scores for credit card accounts during the same time frame.

Lower credit limits for all
In addition, the survey also revealed that 25% had lowered credit limits on existing credit card accounts to prime borrowers, while roughly 60% of banks had lowered credit limits for non-prime borrowers. Not surprisingly, no banks reported raising limits for non-prime borrowers. In both cases, larger banks were more likely to cut limits than smaller banks.

The reasons that banks cited most for reducing credit lines were: the less favorable and more uncertain economic outlook, a reduced tolerance for risk, a decline in customer credit scores and customers missing payments on their loans.

It’s clear that loan officers are jittery about the economy. Until banks begin to see that the times are getting brighter, you can expect these trends to continue.

This post is from Credit Card Watcher, where you'll always find the best credit card deals.

Latest Fed Survey Shows Credit Tightening for Everyone

We continued to tighten our underwriting standards, which reduced new account growth, but increased the quality of our new customers. We proactively manage our existing accounts, including restricting balance growth and transactions on riskier accounts, lowering and, in some cases, closing credit lines, and for a small percentage of accounts repricing them consistent with the customer’s current risk profile.

Not surprisingly, issuers are also less active in trying to acquire new accounts. Nielsen reports that credit card ads were down nearly 24% compared to the same time last year.

Consumers faring poorly
The consumer is feeling their own liquidity crisis. According to Moody’s, credit card delinquencies are at 4.60%, up over 20% from 3.83% a year ago. In August, consumers paid back 13% less on their credit card bills, and the payment rate dropped to 17.40% from 20.07% during the same period last year.

The road ahead
Both Chase and Capital One expect credit defaults to reach 7% next year. Citi also said it expects loss rates to exceed historic highs.

Some analysts have even more dire predictions. A soon to be released report by consulting firm Innovest Strategic Partners forecasts that chargeoffs will reach 10% next quarter, resulting in nearly $100 billion in write-offs. The report also predicts that the banks’ reaction–lowering credit limits, closing accounts and limiting overall access to credit–will force an unprecedented number of customers to default, as consumers will have run out of places to roll their debt. Debt that was first charged to home equity loans and is now being charged to credit cards will no longer have a place to go. Innovest describes the problem as “a symptom of a deeper crisis of deteriorated consumer financial health. For nearly a decade Americans have been taking on more debt while their savings and real wages have declined.”

When I read comments like that, it makes me think that the bailout package should have contained funding for a couple of mandatory classes, Personal Finance 101–”don’t spend more than you can afford” and Credit 101–”credit is not free money.”

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More Signs of the (Credit) Apocalypse

Lower limits and stricter standards for more customers
As has been widely reported, issuers are also looking to decrease their exposure by cutting back credit limits, even for customers with perfect payment histories. As part of its annual review of cardholder accounts, American Express typically reduces the limits for roughly 4% of its customers. For comparison, this year, Amex cut limits on about 10% of its customers.

And according to a July Federal Reserve Board survey of loan officers, about 65% of domestic banks indicated that they tightened their lending standards on credit card loans, up from about 30% in the April survey.

More fees
Fees are also on the increase, as issuers try to generate any income they can. The days of plentiful no fee balance transfers seem like a distant memory. Instead, credit card issuers have been steadily raising the caps on balance transfer fees. For instance, Chase used to charge a 3% fee, with a maximum of $75 or $99 to perform a balance transfer. Now, the fee is 3% with no cap on the maximum charged.

This is not to suggest the days of gloom and doom will remain forever. Interestingly, Capital One just decided to lower the interest rate on a number of its cards and reintroduce an intro 0% offer on purchases for 12 months which it had pulled earlier in the year. The move could signal some increased confidence in the immediate future of the credit market, or perhaps is just a calculated risk to steal market share.

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The Credit Crunch: A Look at the Current Credit Card Fallout

• hiking credit card rates when a customer pays an unrelated bill late even once (such as a monthly utility bill paid with a check)
• using a “two cycle” billing method which allows the credit card company to charge interest on the billing cycle preceding the one in which the bill is mailed (thus greatly increasing the interest charged before it is ever billed out)
• changing the due date without warning or shortening the billing cycle unrealistically thus making timely payment nearly impossible
• offering multiple promotional rates but only applying payment to the lowest rate purchases first, neglecting the highest rate purchases entirely until the low rate purchases are paid off

In an election year, credit card reform might seem like a political no-brainer, and in fact Representative Carol Maloney, Democrat of New York is already sponsoring a “Cardholder’s Bill of Rights” that would enforce limits very similar to the ones already proposed by the Fed in May. Democratic Senator Christopher Dodd, Chairman of the Senate Banking Committee, will soon be sponsoring similar legislation in the Senate. Politically, the legislation is a slam-dunk.

The Downside of Credit Card Reform for Customers
But it’s not all good news.

In the wake of the sub-prime mortgage meltdown, not only have banks been losing enormous sums of money, consumers have found themselves without any ready source of cash or credit just when they need it most. As home values plummet, home equity lines nationwide are being frozen. Many customers now find themselves ‘upside down’ with regard to their secured debt. However, the cost of gas and food keeps rising anyway, jobs keep disappearing, and more and more customers have been leaning on their unsecured credit cards to fill the gap.

Banks and lending institutions are naturally becoming skittish about a projected wave of credit card defaults that could rival the sub-prime meltdown in scope and toxicity. To head off losses that will surely come when the new Federal Reserve fair practices guidelines kick in, banks are starting to quietly lower credit limits on cards held by even their best customers. This immediately impacts credit scores: A major part of a customer’s credit score is calculated on how close to the credit limit the credit card debt has climbed. So, a good customer with $7,000 in credit card debt and a $20,000 limit will instantly see a lowered FICO score when his or her credit limit is reduced to $7500, thus making it even harder to get any other kind of loan.

Taking such preemptive measures may afford a degree of protection to banks, but it also tightens up credit in an already tight credit market and takes away yet another (admittedly bad) tool left to consumers for coping with serious financial crises. So what is understandably popular on a surface level is already having a negative impact on consumers by tightening up the availability of credit and downgrading credit scores even for responsible borrowers.

Clamping Down Hard on Predatory Secured Cards
However, a few practices the Fed hopes to eliminate are so predatory it’s hard to see how they can have anything but a positive effect. For example, many secured credit cards charge exorbitant application fees, card issuing fees, and so many other fees that by the time the card is actually sent out the customer almost no credit is left for that person to use, and what’s more, interest is then charged on the fees for opening and issuing the nearly worthless card. While companies who issue these cards assert that these tactics are necessary due to the risky nature of the customers who apply, the new rules proposed by the Fed will make it much harder for such companies to engage in this kind of predatory unsecured lending.

Credit card lending guidelines do need to be tightened. The Federal Reserve, Congress, and customers all agree easily on that single point. What is much less clear right now is how these tighter rules and standards will affect consumers, banks, and the economy as the current slowdown (some would even say ‘the current crisis’) unpredictably plays itself out over the coming months.

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Proposed Credit Card Rules May Complicate Economic Turndown

Though their use is free, consumer adoption of the technology has been low, prompting American Express to drop the feature several years ago. The latest revelations about the limitations of virtual card numbers, as reported in this SD thread, are not likely to help spread their use, either.

The claims, in fact, are a bit unsettling.

According to the original poster on SD, a merchant was able to successfully use an expired virtual credit card number to make a fraudulent charge:

They used an expired ShopSafe number from a couple of years ago. Not only was it expired but it was for more than the limit I had set for that number.

I was shocked that Bank of America had accepted the clearly bogus charge from an expired and over the credit limit virtual card number. The ShopSafe CSR explained that if a merchant used a manual claim (rather than electronic processing) that they were legally required to accept the charge and it was up to the customer to spot the fraud and dispute the charge. WTF! Apparently, if you’re a crook just make sure you submit manual charges and all will be well.

Later in the thread, another poster, who claims financial industry experience, writes this:

Typically, when a merchant runs your credit card through, virtual or real, they get an authorization number form their processor that this is a valid card and than the merchant can claim their money through this authorization number.

However, an authorization number is not required. Any merchant can just bill the account based on account number and expiration date regardless of whether or not this is an active account or expiration date. The bank will pay them in this scenario as well.

So, apparently there are no automatic safeguards in place if the merchant processes the charge as a manual claim.

It should be noted that most people in the thread that had experience with Citi’s virtual account numbers felt that they worked as expected, blocking unauthorized charges. So on the surface it appears that Citi’s system may have more safeguards in place than Bank of America’s.

What’s the moral of the story here? It appears that virtual card numbers do not offer a level of protection as robust as credit card companies would like you to believe. In the scenario where the merchant manually processes a fraudulent claim, the consumer can easily initiate a chargeback, assuming they notice the charge. But unfortunately, that would seem to defeat much of the purpose of virtual numbers in the first place. With or without virtual numbers, consumers will need to remain vigilant in watching their statements for unexpected charges.

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Do Virtual Credit Card Numbers Really Protect You?