This study out from the General Accountability Office, concerning Credit Card Companies….  you can read the report (PDF) or highlights (PDF) from the GAO.  Read further articles below…

US says credit card late fees up, disclosure poor
Wed Oct 11, 2006 4:22 PM ET

By Susan Cornwell

WASHINGTON, Oct 11 (Reuters) - Penalties for late credit card payments in the United States have more than doubled in a decade, but disclosures of such fees are written in language too complicated for many consumers to understand, a U.S. government report said on Wednesday.

The General Accountability Office (GAO), the investigative arm of Congress, said in its report that the average penalty in 2005 for making a late credit card payment was $34, up from $13 in 1995. Levin noted this was a 115 percent increase.

The highest late fee was $39. Last year, over a third of active U.S. accounts were assessed a late fee at least once, the report said.

Cardholders also could be charged a higher interest rate—sometimes over 30 percent—as a penalty for riskier payment behavior, the GAO said.

The report said fees for going over a credit limit had also more than doubled to about $31 in 2005 from $13 in 1995.

Credit card companies should “clean up their act and eliminate unfair, excessive, and hidden charges,” said Michigan Democrat Carl Levin, who requested the report.

Levin complained that some banks were charging a $15 fee to pay a credit card bill over the phone before the late fee kicks in, “actually charging families money to pay their bill. That’s outrageous.”

“Although penalty interest and fees have likely increased as a portion of issuer revenues, the largest issuers have not experienced greatly increased profitability over the last 20 years,” the report said.

The GAO report examined 28 cards issued by the six largest issuers of 2004: Citibank (South Dakota) N.A.; Chase Bank USA, N.A.; Bank of America; MBNA America Bank, N.A.; Capital One Bank; and Discover Financial Services. The accounts of these issuers make up 80 percent of credit card lending in the United States, where there are over 691 million cards.

A spokeswoman for the Bank of America had not read the report and had no immediate comment. Spokesmen for other issuers could not immediately be reached for comment.

But the GAO said that card issuers argued that using risk-based pricing structures with multiple interest rates and fees had allowed them to offer credit cards to more people, including some who could not get cards before.

It said consumers needed clearer disclosures of these penalties, especially since there were no regulatory or legal limits on the interest rates or fees that cards can impose.

“For example, although about half of adults in the United States read at or below the eighth-grade level, most of the credit card materials were written at a tenth- to twelfth-grade level,” the GAO report said.

Separately, in New York on Wednesday Visa, the world’s largest credit card payment system, said it planned an initial public offering to fund its expansion.

© Reuters 2006. All rights reserved.

GAO study slams credit card fees, disclosures
Posted: Oct. 11, 2006

By Ellen Cannon • Bankrate.com
It’s not just the consumers’ fault that they don’t understand the terms of their credit cards, the Government Accountability Office said in a report issued Oct. 11.

The 114-page GAO study said that because credit cards now have a range of interest rates and fees, the disclosure needs to be expressed in a clear and more understandable manner. The report was requested by Sen. Carl Levin, D-Mich., in response to the complex fees and rates that credit card issuers charge.

“Millions of Americans depend on credit cards to pay their bills and buy essentials like groceries or gas,” Levin said in a press release. “Unfair or confusing credit card practices take advantage of working families. This report shines a needed spotlight on excessive credit card fees, unfair interest rates and inadequate disclosure practices that ought to be stopped.”

For the study, six large credit card issuers provided data on interest rates and fees paid. Their data showed that in 2005 nearly 80 percent of their accounts were assessed interest rates of less than 20 percent, and more than 40 percent had rates below 15 percent. However, they also reported 35 percent of their accounts paid late fees and 13 percent paid over-the-limit fees.

Complex wording

The GAO employed a usability study to analyze credit card disclosure, and it concluded that “disclosures from the largest credit card issuers were often written well above the eighth-grade level at which about half of U.S. adults read.”

In addition, the GAO interviewed 112 cardholders and said they were unaware of key aspects of their credit cards, including what the late-payment fee would be and why the issuer could raise their rates.

The report also cites various practices that consumer groups have sought to have banned, such as universal default (where a cardholder’s interest rate can be changed based on behavior with another creditor, such as a utility company), payment allocation (where the payment is applied to the low-interest balance before the higher-rate balance) and “trailing” or “residual” interest (where cardholders are charged interest on balances they’ve paid the previous month).

Another finding in the GAO study was that issuers are moving away from charging over-limit fees. In 2003, 85 percent of the cards surveyed charged over-limit fees, while only 73 percent did in 2005. Issuers said that they are pursuing “competitive strategies that seek to increase the amount of spending that their existing cardholders do on their cards as a way to generate revenue.” Usually, if cardholders were near their credit limits, they would be more likely to stop using those cards.

Fees, fees, more fees

If issuers were not enforcing over-limit fees, though, there are certainly enough new fees being charged, according to the report. The majority of the most popular cards now charge fees for cash advances, balance transfers, foreign transactions, telephone payments and duplicate copies of statements.

“There are so many credit card fees and penalties these days that consumers need a score card to keep track,” Levin said in a release. “Inadequate disclosure compounds the problem. I hope (the report) will also serve notice to credit card issuers that they need to clean up their act and eliminate unfair, excessive, and hidden charges.”

“Every day, people’s lives are ruined when credit card companies triple or even quadruple the interest rates on their existing credit card balances,” said Linda Sherry, director of National Priorities for Consumer Action, which provided historical data for the study. “If people are having a little trouble paying on time, how does it help to suddenly hit them with 30-plus percent interest rates and steep increases in minimum monthly payments?”

Consumer groups’ reactions

Consumer Action, Consumers Union, Consumers Federation of America and U.S. Public Interest Research Group issued a joint press release in which they welcomed the report, but said they hoped the government would go further and ban some of the anti-consumer practices. “Consumer Action is hopeful that this excellent report will be a wake-up call to Congress and federal bank regulators that things need to be changed to protect consumers from abusive industry practices,” said Sherry in an e-mail message.

“We are pleased Sen. Levin requested the report, although we are disappointed that it contains very little new or privileged information,” said Sherry. “We had expected the GAO to use its power to get at real behind-the-scenes information, such as the exact amount of money the banks make off fees and the relation of those fees to the actual costs borne by the banks and the current market shares of each national bank. Some of the information appeared to us to be rehashed.

“Nonetheless, we welcome any opportunity to shine light on the industry’s anti-consumer practices.”

Is my spouse liable for my credit card debt?

In community property states, a Creditor can claim that if you were married at the time the debt was incurred, both you and your spouse are liable regardless of whether or not you and your spouse were joint account holders.

Community property states are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin

from wikipedia:

In a community property jurisdiction, most property acquired during the marriage (except for gifts or inheritances) is owned jointly by both spouses and is divided upon divorce, annulment or death. Joint ownership is automatically presumed by law in the absence of specific evidence that would point to a contrary conclusion for a particular piece of property. The community property system is usually justified by the idea that such joint ownership recognizes the theoretically equal contributions of both spouses to the creation and operation of the family unit.[1]

Division of community property may take place by item, by splitting all items or by value. In some jurisdictions, such as California, a 50/50 division of community property is mandated by law;[2] in others, such as Texas, a divorce court may decree an “equitable distribution” of community property, which may result in an unequal division of such. In non-community property states property may be divided by equitable distribution. Generally speaking, the property that each partner brings into the marriage or receives by gift, bequest or devise during marriage is called separate property (i.e., not community property). See division of property. Division of community debts may not be the same as division of community property. For example, in California, community property is required to be divided “equally” while community debt is required to be divided “equitably”.[3]

Property that is owned by one spouse before the marriage is the separate property of that spouse, unless the property is “transmuted” into community property. The rules for this vary from jurisdiction to jurisdiction.

Handy calculator to determine what it will take to pay off your credit card debt:

Calculator: Paying Off Credit Card Debt

Handy worksheet to help you take stock of your credit card debt

Worksheet: Credit Card Inventory (PDF file)

Every three years, the Federal Reserve Board conducts a survey on finances of U.S. families.  The survey includes information on income, assets, net worth, pensions, etc.  Being curious, I decided to see what the last survey had to say.  What exactly ~is~ the status of U.S. families?  How are they faring?

First, for those who don’t know or have forgotten, let’s cover what is meant by “mean” and “median”.  “Mean” is an average, while “median” means the middle. 

You have a list of numbers: 1,2,3,4,5,6,7.  The mean (or average) would be: 4.  The median is: 4. 
But suppose you replaced the 7 with 29: 1,2,3,4,5,6,29.  The mean (or average) would be: 7.  The median is still: 4.

What does this show? 

Consider you have 10 people in the room.  The mean (average) income for those 10 people is $50,000 per year.  The median income is also $50,000 per year.  Suppose one of those people is replaced by Bill Gates.  The median income remains $50,000 per year, but the mean income goes to $50 million.  You could now say that the average income is $50 million per year, but how accurate is that?  The deviation between the median and mean give you a better glimpse of the ~reality~ of things.

The 2004 “Recent Changes in U.S. Family Finances” Summary shows:

• Family income during the 2001-2004 period
• - Median increase 1.6 percent
• - Mean decrease 2.3 percent
• Family net worth during the 2001-2004 period
• - Median increase 1.5 percent
• - Mean increase 6.3 percent
• Median wealth declined for families in the bottom 40 percent of the income distribution and rose for those higher in the distribution
• Mean wealth stayed about the same for all income groups

In the three years after the 2001 survey, interest rates moved generally lower; indexes of equity market performance trended generally downward over the early part of the period but made up the losses with gains in 2004; and residential real estate appreciated strongly.

However…

The overall share of financial assets in families’ portfolios… declined despite substantial gains in holdings for some groups.  Of particular note, the share of families that held stocks either directly or indirectly through an account type retirement plan or another type of managed asset account fell to about 49 percent in 2004 after having reached an SCF high of almost 52 percent in 2001.

This decline is explained due to the rise in non-financial assets; strictly, real estate.  Homeownership went up by 1.4 percent, while ownership for other residential real estate (2nd homes, investment properties) went up by 1.2 percent.  So basically, people transferred their financial assets over to real estate (home ownership).  It will be curious to see what happens in the 2007 Survey, seeing that we’ve had such a problem with the housing market recently.

To further underscore this point, the proportion of families assets offset by debt rose from about 12 percent in 2001 to 15 percent in 2004.  Banks own alot of homes :|  And sadly, we’re seeing a huge climb in the number of foreclosures (See Homes Facing Foreclosure Doubles).

Hand in hand with this, the 2004 period also saw a rise in the proportion of families that had been delinquent with their debt payments, along with an increase in the median ratio of loan payments to family income.

Again, I’ll be very curious to see where we stand in the 2007 survey.  From the 2004, it would appear that the adage, “the rich get richer, while the poor get poorer” does indeed apply.
 

i have a pet peeve with banks.  while i sincerely appreciate the fraud prevention that many have implemented, i find it disturbing to be called at home by someone purporting to be from my bank, who asks me about my accounts and charges on those accounts.  my normal reaction is to give them absolutely no information and to request a name and phone number from them.  then i call the bank’s main number and tell them who i was contacted by.  if it’s a valid call, they’ll transfer me to the correct department.  it may seem somewhat paranoid, but with identity theft a very real issue, it’s the safest way.

this morning, i received a call from “tonya” at “imagine mastercard”.  she stated she was with the “fraud dept” and that they were trying to locate *me* to verify that i had opened an account with them in oct-2007.  when i wasn’t forthcoming with information, because i didn’t trust the phone call, she tried pumping me for information, “have you lived in missouri?”  no, never been in missouri.  i continued to remain skeptical of the phone call and, since i wasn’t a willing victim, she ended the call with, “i suggest you check your credit reports, as several accounts were opened using your information.”

well.  she’s right.  i checked my credit report and i’ve had accounts opened using my information… by me.  none in october of 2007.  no entries showing ‘imagine mastercard’ or it’s 1st bank of delaware.  no suspicious activity at all.

looking up “imagine mastercard”, i see that they’re a “bad credit, no problem” credit card company.  i called them directly and, as i expected, they required my ssn to be able to verify whether they had actually called or not.  since they do not show on my credit report and since i’ve never opened an account with them, i refused to give them that information.

i’m unsure what the actual purpose of the call was, but based on the behaviour of the woman who called me and their company representatives that i spoke with later, i believe something fraudulent was afoot.  two scenarios immediately came to mind: one, they call people alerting them of “fraudulent accounts”, hoping that it scares the people bad enough that they will react by divulging personal information that can be used to open accounts.  or.  two, they have bad debts that they’re trying to hang on anyone who is scared enough to divulge information, so that they can report it to credit reporting agencies and possibly be paid by a panicked consumer.  the 2nd may seem farfetched, but i’ve had a similar experience with someone calling and claiming that i’d written a hot check and to come in and pay it immediately.  when i asked for a copy of the check before i’d pay, it mysteriously became unavailable.  (it wasn’t mine and i knew that from the start.)

whomever it was and whatever their purpose was, *something* was wrong with that phone call.  be very very careful if you receive similar calls.  do NOT ever divulge ANY personal information to someone who calls YOU.  ask them for their name and a number you can reach them at.  then look up the company and call them directly.  let them connect you to the person who called.  the same holds true with emails.  never click through a company’s email to go to a url or reply to their email, unless you KNOW that the email is trustworthy.  personally, even if i believe / know the email is trustworthy, i still refuse to click through.  i go directly to the company’s website myself.

it’s entirely possible, as a 3rd scenario, that it was just a mistake (though they did have my name) and they called the wrong person. 

it’s better to be safe than sorry, however!