How to Deal with New Credit Card Law

The newest changes to the law regarding credit card companies and how they are to deal with consumers is out. Supposedly, the changes in the law are meant to protect consumers, and if the past is any predictor of the future, but is probably just an illusion.

Holding Your Bank to New Credit Card Law

Today’s a big day for anyone with a credit card. A host of changes passed by Congress in the Credit Card Accountability Responsibility and Disclosure (CARD) Act in the wake of the financial meltdown go into effect today.

You’ve probably already heard quite a bit about the major changes, such as protections against unexpected rate hikes and the end of so-called double-cycle billing, which charges cardholders for interest based on the previous two billing cycles.

But what do you do if you think your bank isn’t living up to the new rules? In fact, when it comes to consumer recourse, credit card experts say that despite the new policies, consumers’ options remain little changed.

And of course, the moves by your bank that might upset you the most may not fall afoul of the CARD Act at all. As the new rules have cut off some old practices, banks have been trotting out new policies and fees that allow them to take additional money from consumers. And those consumers may not have any new legal avenues to pursue.

“Consumers are not the winners in this system very often,” says Linda Sherry, a spokeswoman for Consumer Action, a consumer-advocate organization. So we went to credit industry and consumer experts and asked them what are the key steps to take if they believe their banks aren’t living up to the new regulations.

Prepare for your conversation with the bank

When a credit-card issuer violates the new rules, consumers should first contact the company's customer service department. (That phone number is on the back of most credit cards or on the web site of the card issuer.) Just make sure you’re familiar with the provisions of the new law – and its many loopholes – and be ready to show proof that the lender has violated them.

“Consumers would have to be familiar with the law and they would have to have some sort of evidence of what had happened to them and clear understanding of what is legal,” says Sherry.
Assuming the law is on your side, the customer service department may undo the error while you’re on the phone – or there may be an ongoing back-and-forth. Conversely, the credit-card issuer could dismiss your complaint and say that it’s acting within its rights.

Complain to the bank’s regulator

The next line of defense for the consumer is the bank’s regulator. Nationally-chartered banks are regulated by the Office of the Comptroller of the Currency (OCC). Consumers can call this office at 800-613-6743 to speak with a customer service representative. Then, the OCC may reach out to the bank to investigate the complaint. The time it takes for complaints to be addressed varies. In 2009, the OCC received 70,000 complaints that involved investigations and each took 60 days to resolve on average, says Dean DeBuck, an OCC spokesman.

Consumers should be aware that the OCC has drawn some criticism as a regulator because it has a financial incentive to hold banks under their national charter. The OCC is candid about its relationship with banks but maintains its regulatory role isn’t compromised.

State-chartered banks are regulated by a state regulatory body. And American Express (AXP: 38.93, -0.13, -0.33%) is regulated by the Federal Deposit Insurance Corporation (FDIC).
Consumers who aren’t sure who regulates their bank can ask their bank’s customer service department or a local consumer advocate.

When a regulator finds a bank has violated a rule, it can assess penalties, including monetary payments or poor examination reviews that could result in a bank being shut down.

Call your state attorney general

A consumer should also complain to their state attorney general, especially if the bank is state-chartered. If the office receives multiple complaints, it could launch an investigation into the bank.

Even if the bank is nationally-chartered, having a complaint on file with the state attorney could still be helpful down the road, Chi Chi Wu, staff attorney at the National Consumer Law Center, says.

Go to court

If a consumer hasn’t gotten results by reaching out to the bank or its regulator, he can consider taking the bank to court.

Most consumer protection laws, including the CARD Act, have fee provisions mandating that if the consumer wins, the bank will have to pay their legal fees, and if the bank wins, they won’t have to pay either. The key is to find an attorney who will take the case on contingency (meaning that they only charge fees if they win) and who adhere to the consumer fee provisions in case of a loss. (To find such an attorney, contact the National Association of Consumer Advocates.)

Some attorneys will be on the lookout for similar consumer cases against particular banks, which can lead to a class action. If a consumer is successful in suing the bank, the consumer gets damages based on the amount he was overcharged, plus statutory damages.

Settle in arbitration

Many consumers may never get to court because they get stuck in arbitration, a third-party justice system that is contracted by the banks. In many cases, consumers who have credit cards are contractually bound to settle disputes in these forums, and the consumer must pay the costs, says Sherry. (Such a clause can be included in the agreement a consumer signs before he starts using a credit card.)