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CARD Act may not limit interest rates on credit

Earlier this week this blog reported that Ohio residents are carrying a high credit card debt load. The Federal Reserve says all across the country American consumers are returning to credit cards to pay for their purchases. Credit card companies reportedly are experimenting with the credit card market with offers of high interest rates. Cincinnati bankruptcy attorneys know that exorbitant credit card interest rates can make it even more difficult for families to make ends meet.

Credit card use in the U.S. increased in December according to the Federal Reserve. December was the first month that credit card purchases increased since August 2008. Overall consumer borrowing started to rise in October, with December posting the third straight month for increased consumer loans. U Servicing unsecured debt, such as credit card debt, can often lead to financial distress for American consumers.

Recently First Premier Bancard in South Dakota offered a new credit card targeted at people with bad credit. The credit card company says it received 9,000 applications for the offering, which set the interest rate at a whopping 79.99 percent. In 2010, the Federal Reserve says the average interest rate charged on American credit cards was 13.78 percent.

First Premiere no longer offers the card at the exorbitant 79.9 percent interest rate. The company says the test showed poor performance. The credit card company dropped the top rate to 59.9 percent. The cards are offered with very limited credit lines, typically around $300, according to the financial institution.

Chi Chi Wu, of the national Consumer Law Center says that although the credit card company reduced the interest rate on the card, fees associated with the card were not reduced. Wu says Premier is known as a "fee harvester." The fees associated with the card often max out the available credit, leaving little room for consumer purchases.

In 2009, President Obama signed the Credit Card Accountability, Responsibility and Disclosure Act. The law, known as the CARD Act set a 25 percent cap on credit card fees. Credit card companies reportedly know that exorbitant interest rates can be legal under the law, as long as the interest rates are done retroactively. The Card Act applies to fees, allowing for interest rates on 59.9 percent on past purchases, according to Wu.

Source: ABC News, "Credit Card Interest Rates Gone Wild," Susanna Kim 8 Feb 2011

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