The remainder of the new Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 regulations go into effect in February 21st, and a lot of credit card companies are making changes before those changes are banned.
One such change is hiking the APR. Come February, credit card companies will only be allowed to raise the interest rate on a credit card if:
- The card holder is significantly late on his payment
- The underlying interest rate index changes
In what has to be one of the most outrageous exploits of this loophole First Premier Bank is rushing to abuse it’s card holder to beat the February clock – with a 79.9% APR!
I suppose it isn’t surprising, since First Premier Bank is a subprime credit card issuer and hence has a reputation for exploiting people with poor credit.
Here’s the loophole:
Beginning in February, fees are capped at 25% of the card’s limit. First Premier’s subprime credit card has a $250 credit line, and currently carries a minimum $256 in fees. Since the CARD act limits fees, but not interest rates, Premier has altered the card offering as follows:
Maximum credit line: $300
Fees: $75 (25% of $300)
Over your limit penalty: $29, if balance tops $300
APR: 79.9%!
As mentioned above, First Premier offers credit cards to subprime borrowers, i.e. those with bad credit and little opportunity to get access to credit. If this isn’t usury, I don’t know what is…
For their part, First Premier has said that existing card holders will still be able to keep their cards though no decision has been made regarding hiking those rates. They also state that they need to “price our product based on the risk associated with this market.”
First Premier typically works with those whose credit score is under 700, but in the 3rd quarter of 2009 those offers were down to 84% from 91% in 2008, so they appear to be targeting subprime borrowers a bit less.
[...] If you can’t pay off the balance completely, pay down as much as you can because some credit card companies are hiking rates on existing balances before the new CARD Act regulations take effect on February [...]
[...] they try to rebuild their credit, they find all doors closed to them – or worse, they receive barely legal credit card offers looking to exploit [...]