Will it soon pay to have a no-frills, no-rewards credit card in your wallet? Under a proposed settlement just reached between the Justice Department and Visa and MasterCard, merchants will now be allowed to offer discounts, rebates or other incentives to use cards with lower processing fees, such as “no-frills” credit cards without rewards or points programs. As the cost of processing a charge varies widely, depending in part on whether the customer is using a rewards card, there is significant motivation for merchants to promote lower-cost credit card networks.

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.

The Federal Reserve announced a few more changes to the Credit CARD Act that will be effective August 22, 2010. Many of the changes included in this final rule represent a reaction to some of the practices that credit card issuers have recently adopted.
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As one of the provisions of the Credit CARD Act, credit card issuers are now required to post their account agreements online and to supply them to the Federal Reserve. This week, the Fed used this information to debut a searchable online database of credit card agreements at www.federalreserve.gov/creditcardagreements/.

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.

Earlier this year, two large arbitration firms announced they would no longer be handling credit card collection disputes. Now comes word that, as a result of a huge class action lawsuit against the major banks, many of them are starting to drop the language in their contracts that requires consumers to engage in binding arbitration rather than taking their case to the courts. Earlier this week, B of A announced it would drop these requirements for consumer and small business agreements for at least three and a half years. On Thursday, Capital One became the latest bank to agree to drop the clause, as part of a settlement over the lawsuit. B of A and Cap One join JPMorgan Chase, which had previously reached a similar agreement in November.

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.

A new study by the Center for Responsible Lending finds that credit card issuers have managed to find new ways to pad their profit and work around the Federal Reserve Board rules and federal law set to take effect in February 2010. Even as old abuses are outlawed, CRL finds that new ways to squeeze fees out of consumers are being introduced and popularized.
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The latest quarterly Fed survey of bank loan officers found that banks expect to tighten or have already tightened credit card terms on all borrowers, as a direct result of the impending enactment of the Credit CARD Act.
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JD Power recently released the results of its annual credit card satisfaction survey which once again found American Express and Discover ranking #1 and #2 respectively in customer satisfaction. Overall, customer satisfaction levels were the lowest since the survey’s inception in 2007, and the lowest among all the financial services sectors that JD Power monitors, no doubt driven by the escalating rates and fees that consumers have been experiencing this year.
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The first part of the Credit Card Accountability Responsibility and Disclosure Act of 2009 takes effect today. Under the new law:

• 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.

After coming under attack over whether their processes were fair, two large arbitration firms, the American Arbitration Association (AAA) and the National Arbitration Forum (NAF), recently said they were suspending their credit card arbitration activities. This could lead to more options for consumers.
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