Watchdog groupsâ€™ push for accountability in the burgeoning credit card industry has found reinforcement in a report released by the Government Accountability Office this week.
The GAO investigated issues related to credit card fees and practices, finding that some pricing structures and fee disclosures are misleading and difficult for consumers to understand.
While the GAO is calling on the Federal Reserve Board to revise requirements for credit card disclosures to make them clearer for consumers, advocacy groups are pushing for stronger reform.
GAO researches assessed six of the largest credit-card issuers in the United States, including Citibank and Bank of America, Capital One, and MBNA, which Bank of America absorbed last year.
"The expansion and increased complexity of card rates, fees, and issuer practices has heightened the need for consumers to receive clear disclosures that allow them to more-easily understand the costs of using cards," the report concluded.
In addition to identifying several different and complicated credit-card fees, the report found that fee disclosures were "buried" in text and printed in "small typefaces." According to the report, "as a result of these weaknesses," cardholders may have had "difficulty using disclosures to locate and understand key rates or terms applicable to the cards."
While detailing some of the more predatory aspects of card companiesâ€™ standard practices, the GAO fell short of recommending regulatory or legal action beyond the creation of new disclosure rules. The actual practices described in disclosure agreements â€“ deceptively or otherwise â€“ are not addressed in the Officeâ€™s recommendations.
In addition to identifying several different and complicated credit card fees, the report found that fee disclosures were â€œburiedâ€ in text and printed in â€œsmall typefaces.â€
Consumer Action, the Consumer Federation of America, Consumers Union and US Public Interest Research Group (US-PIRG) collectively expressed their outrage over what theyâ€™re calling "abusive" company practices in a press statement issued on Wednesday.
The groups called on lawmakers and regulators to hold the credit card companies accountable to consumers.
"For too long, the Congress and the do-nothing regulators have let the banks get away with practices that should be banned," said Ed Mierzwinski, consumer program director of US PIRG, in the press release.
Critics are pushing Congress to pass laws that would put stricter limitations on company practices, as well as on card rates and fees.
Specifically, advocates want lawmakers to force credit card issuers to provide consumers with warnings about minimum payments on each billing statement. Such notices would include how much interest will accrue if the cardholder only makes the requested minimum payment.
Advocates also want to see companies forced to disclose card policies in all offers, a ban on contracts that allow issuers to change terms for any reason; and increased penalties for illegal acts committed by card issuers.
The GAO fell short of recommending regulatory or legal action beyond the creation of new disclosure rules.
Credit card debt has been on the rise for the past several decades. In 1990, cardholding American households owed an average of $2,966 to credit card companies; in 2005, that debt reached an average $9,159, according to CardWeb, a firm that analyzes the industry.
The report said that while paying penalty interest and fees can "slow cardholdersâ€™ attempts to reduce their debt," the correlation between these fees and the rate of consumer bankruptcies is "unclear."
Although fees and penalty interests have risen, the GAO found that issuerâ€™s profitability ahas not "greatly increased" over the last 20 years.