GAO Study Blasts Credit Card Issuers

by Mike Bevel, CollectionIndustry.com

File this under “d” for “duh” – but a recent Government Accountability Office report found that credit card companies don't clearly disclose penalties, variable interest rates and other fees, leaving consumers confused and bewildered about the true cost of using plastic to pay for everyday transactions.

The GAO looked at the lending agreements and marketing materials of the Big 6 in credit card issuers: Citibank, Chase Bank USA, Bank of America, MBNA America, Capital One Bank, and Discover Financial Services.

Some of the disturbing findings:

• Credit card companies not only impose late fees nearly triple that of a decade ago, but they’ll also significantly raise the interest rate on past and future charges, possibly to as high as 30 percent.

• Three of the companies surveyed charge interest on debt already paid. As the Washington Post pointed out, “If a consumer charges $500 and pays off $450 before the billing cycle ends, these companies will charge monthly interest for the entire $500, not just the remaining $50.”

• The GAO also found circumstantial evidence linking penalty fees and interest rates to some consumer bankruptcies.

To read the full GAO report, click here. (The report is a pdf.)

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