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Card Issuers Sneak In Hikes to the Indebted

Stocks in this article: JPM BAC

ARLINGTON, Va. ( TheStreet) -- You may or may not be fully up to speed with the changes instituted by last year's credit card law, the CARD Act, but you're most likely aware that as a consumer you have some new rights because of it.

Unless your job revolves around personal finance, though, how are you to know whether your credit card company is operating outside the legal and ethical parameters governing the new credit card landscape?

When it comes to your credit card, it's best to read the fine print. Some issuers have tried raising fee increases for the indebted.

For one thing, you might not realize the significance of a notice that the annual fee on your credit card is going up. But make no mistake about it, this type of action is alarming because it might break the intent of the CARD Act provision making it illegal for credit card companies to increase the interest rate on a credit card balance unless the account holder is 60 days delinquent.

You see, there is also no effective difference between interest rate increases and fee increases when they are applied to indebted accounts. Both increase your account's finance charges as defined by Regulation Z: Truth in Lending. Both increase the cost of debt. Both punish consumers unfairly with revolving balances.

Unlike debt-free consumers, indebted customers cannot always switch to a different issuer when faced with increased rates or new fees. Therefore, when credit card companies arbitrarily increase the cost of consumer debt, they're merely profiting from their customers' lack of mobility.

JPMorgan Chase (JPM) tried this stunt before the CARD Act took effect and was forced to recall the fee under pressure from the New York attorney general and repay customers it had already charged. Now, Bank of America (BAC) has announced it will apply $59 membership fees to about 5% of its customers based on risk profiles, thereby ensuring that the fees will be applied to indebted accounts.

Large banks are known to follow in each other's footsteps, so before Wells Fargo (WFC), HSBC (HBC), Citi (C) and the like decide to follow Bank of America's lucrative lead, the Federal Reserve must close this loophole, as it did when other gaps surfaced between the CARD Act's intent and its practical application.

In the meantime, if you get hit with an annual fee increase, bring this to the attention of the Federal Reserve and Consumer Financial Protection Bureau.

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Odysseas Papadimitriou is CEO and founder of, a website dedicated to helping you find the best credit card, charge card and prepaid card.

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