Credit Card Reform Law takes place

Consumer Gains on Credit-Card Law Pared by Rate Hikes

By Jeff Plungis

Aug. 19 (Bloomberg) -- Americans with the best credit may be hurt the most as the first phase of a credit card reform law takes effect tomorrow, said Schwark Satyavolu, founder of a card-comparison Web site.

Lenders are raising rates across the board, according to Satyavolu, president and co-founder of BillShrink.com, which compares terms offered to consumers for credit cards, mobile phones and gasoline. The company says the average lowest card rate is about 11.25 percent, up from 8.85 percent in January. The average for less credit-worthy customers rose to 15.75 percent in July, from 13.75 percent in January.

“Banks are setting the bar high enough so they’ll only go down from here,” Satyavolu said.

The law gives cardholders some of the tools Congress promised to exercise more control over their accounts. They’ll have 45 days to reject proposed rate increases and they’ll have the option of paying off their existing balances at the current rates over a period of at least five years. Companies will have to mail bills 21 days before the due date, up from 14 days.

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Credit Card defaults rise to record in May in The US

NEW YORK (Reuters) - U.S. credit card defaults rose to record highs in May, with a steep deterioration of Bank of America Corp's lending portfolio, in another sign that consumers remain under severe stress.

Delinquency rates -- an indicator of future credit losses -- fell across the industry, but analysts said the decline was due to a seasonal trend, as consumers used tax refunds to pay back debts, and they expect delinquencies to go up again in coming months.

"I find it hard to believe that it is really a trend. You need to see stabilization in unemployment before you see anything else," said Chris Brendler, an analyst at Stifel Nicolaus. "It is too early to see some kind of improvement."

Bank of America Corp -- the largest U.S. bank -- said its default rate, those loans the company does not expect to be paid back, soared to 12.50 percent in May from 10.47 percent in April.

The bank is paying the price of expanding rapidly in recent years and of holding one of the highest concentrations of subprime borrowers among the top card issuers, analysts said.

In addition, American Express Co , which accounts for nearly a quarter of credit and charge card sales volume in the United States, said its default rate rose to 10.4 percent from 9.90, according to a regulatory filing based on the performance of credit card loans that were securitized.

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