printer iconPrinter-friendly Version



Banks Charging for Ludicrous Things Like Paying Your Bill On-Time; Interest Rates Up 20 Percent - Cost Hundreds of Dollars a Month for Many Families

Schumer, Maloney Will Also Discuss Legislation Preventing Sky-high Fees On Small Overdrafts on Debit Cards - No More $35 for a Cup of Coffee

Today, U.S. Senator Charles E. Schumer and Congresswoman Carolyn Maloney blasted major credit card companies for trying to impose new hidden tricks and fees to bilk New Yorkers out of millions before tough new federal rules go in to effect next year. Schumer and Maloney provided new specific details about the types of fees New Yorkers need to watch out for including a credit card company more than doubling the minimum monthly payment and charging a new fees for canceling a card or even for paying the outstanding balance on time.  Schumer and Maloney said that the credit card companies are trying to do an end run around tough federal rules limiting these types of fees and interest rate hikes set to go in to effect next year. They are both pushing new legislation to fast track the implementation of the new rules so they go in to effect December 1st rather than as late as August of 2010.


“The bottom line is that consumers are being taken advantage of by greedy credit card companies,” Schumer said. “During these tough economic times, families across New York are struggling to make ends meet and the last thing any company should be doing is hitting consumers where it hurts most-- their wallets. These sneaky fees and tricks are ripping off consumers across the country and it’s time to stop them dead in their tracks. Consumers everywhere must pay close attention to any changes with their credit cards so these companies do not get away with these despicable actions.”


“The card companies said they needed this time to adapt their systems to conform to the new rules. Instead, many have used the time to squeeze more money out of their customers. So I’m proud that the Financial Services Committee approved my legislation last week to move up the effective date of my original reforms,” Maloney said. “The companies brought this on themselves, and their practices—which the Federal Reserve called “unfair” “deceptive” and “anti-competitive”-- must be stopped. Even Ben Bernanke, Chairman of the Federal Reserve, admitted this week that moving the date up would benefit consumers.”


Schumer and Maloney today said that credit card companies have been raising rates and tacking on new fees to swindle consumers as much as possible before the new rules go into effect as scheduled next year.


For example, credit card companies are racing to increase interest rates on existing balances. A study by the Pew Charitable Trusts Safe Credit Cards Project has found that credit card interest rates rose 20 percent in the first six months of this year - despite the fact that most other federal interest rates actually went down. Some Wells Fargo customers found their credit card interest rates double this month. This will not be permitted when the new rules go into effect.


In addition, Schumer and Maloney said that many companies are changing the underlying terms for repaying outstanding balances including by suddenly increasing minimum payments, then charging steep fees and interest charges for not being able to pay the minimum balance. This will not be permitted when the new rules go into effect.


Today, Schumer announced that he is backing in the Senate new legislation authored by Maloney in the House to move up the deadline for credit card companies to comply with new restrictions passed as part of the Credit CARD Act of 2009, passed earlier this year. The original bill gave companies until February 2010, and in some cases even as late as August 2010, to comply with the new restrictions because credit card companies said they needed months to update their computer systems. The new legislation, the Expedited CARD Reform for Consumers Act of 2009, sponsored by Senator Mark Udall (D-CO) in the Senate, would require companies to comply by December 1, 2009.


Schumer and Maloney highlighted specific provisions of the original CARD Act that have not yet been enacted but would significantly restrict credit card companies’ ability to suddenly increase rates and charge new fees. Specifically, Schumer and Maloney said the new legislation would fast-track rules that would:


  • Prohibit new fees for paying bills on time;
  • Prohibit raising interest rates on existing balances;
  • Prohibit changing the terms for repaying outstanding balances, including by raising minimum monthly payments;
  • Increase protections for student cardholders;


Schumer and Maloney also urged customers to take action if their credit card issuer starts raising rates and charging new fees. First, consumers should call their credit card company and complain about the fess. Often, if a consumer has a strong credit score, a company may be willing to waive the fee. If the company is unwilling to waive the fee, consumers have the option of dropping their account. But consumers should be advised that closing a credit card may negatively impact one’s credit score.


Overdraft Fees

Schumer and Maloney today also discussed their legislation that would prevent banks from unknowingly placing their consumers in overdraft loan programs and require banks to warn customers when a transaction will result in an overdraft fee and give them a chance to cancel the transaction. 


In the last ten years, it has become common practice for banks to enroll many of their account holders into expensive overdraft “loan” programs automatically – an option customers generally don’t want and often aren’t even aware of. This allows the bank to accept over-the-limit debit card charges and assess a fee for each purchase over the limit, rather than rejecting the card at the point of sale. According the Center for Responsible Lending (CRL), 80% of consumers would rather have their debit card transaction denied than have it covered in exchange for an overdraft fee, but are never given the choice because they are automatically enrolled in overdraft loan programs.


Furthermore, banks game the system by rearranging the order of charges to maximize the fees they can squeeze from a costumer.  For example, if a consumer has $10 in their account and makes three $2 purchases and then a $9 purchase, he or she should only be charged for a single overdraft.  However, banks commonly rearrange charges so that the $9 purchase would be charged first, and then the three $2 charges.  Therefore, instead of paying a single overdraft fee, a consumer pays 3 – likely producing $100 in fees for the bank.


These fees result in billions of dollars in profits for banks nationwide, mostly from small transactions.  The average transaction on which an overdraft fee is charges is $20, but the average fee charged is $34.


Their legislation would:

  • Require banks to give consumers the choice to not participate in an overdraft protection program.  Consumers will either have to choose to opt in to a program or have an easy method of opting out.
  • Increase disclosure of the fees and APR charges on overdraft loans so that consumers can factor that in when choosing a debit card provider.
  • Prohibit banks from manipulating the order in which checks and other debits are posted if it causes more overdrafts and maximizes fees.
  • Require fees charge by banks to be reasonable and proportional.


Resource Center
chuck around new york icon
Chuck in New York
See what Chuck has been doing in
your area lately
Casework Icon
Services for New Yorkers
For help cutting through the federal government's red tape
Tours Icon
Schedule a Tour
Plan your trip to Washington D.C.
Veterans Icon
Veterans Assistance
Help for those who have served our nation
Protecting Consumers icon
Protecting Consumers
Help and Resources for New York consumers
Grants Assistance icon
Grants Assistance
Guide to applying for federal grants
Financial aid assistance icon
Financial Aid Assistance
Guide to applying for federal financial aid
e-newsletter icon
facebook icon
twitter icon
youtube icon
flickr icon
CMF Bronze Mouse Award for the 111th Congress