by Joseph Kenny | 02/8/10

The Credit Card Accountability Responsibility and Disclosure Act of 2009 goes into effect in a month. Known as the Credit CARD Act, its purpose was to put limits on when interest and fees on credit cards could be initiated. There was a lot of ballyhoo over this new legislation. It was written while consumers were at their angriest about banks getting taxpayer bailout funds and then raising interest and fees on consumer credit cards.

As the implementation of the new legislation draws near, regulators are discovering that the financial industry can be quite elusive when it comes to imposing regulations. The new rules say, in a nutshell, that credit card companies cannot raise interest rates within the first 12 months of a card being issued. In addition, the new rates imposed after 12 months will only apply to new charges on the account.

This is a big difference from current practices and credit card companies are concerned the new rules will seriously affect revenues. That is why they have spent time finding ways to get around the new rules. One of those ways is to charge a new fee that is not interest and is not a fee tied to payment schedules.

For example, Alliance Data Systems has developed a “statement fee”. This new fee will be charged to customers who choose to get a paper statement. It is a $1 fee but it clearly flies in the face of the new regulation. Alliance Data Systems issues private-label credit cards. The new Credit CARD Act limits when a credit card company can impose fees on payments. It does not saying anything about statement fees.

Here is an interesting fact. The Office of the Comptroller of the Currency is responsible for monitoring and regulating credit card companies’ compliance with the law. But the same Office of the Comptroller of the Currency objected to the new law on the grounds it would lead to tighter consumer credit after credit card companies lost revenue from an inability to raise fees. That means the same agency that objected to the law is now responsible for enforcing the law.

Consumers need to analyze their credit card statements closely and look for new charges and fees. It is expected there will be a flood of new fees as soon as the companies can figure out how to get around the law. There was talk about passing another set of regulations that would force the credit card companies to give advance notice on any new fee, but that is not likely to happen.

Congress has moved on to other hot topics like health care. In addition, there seems to be little desire to impose new regulations that the credit card companies will only find a way to work around because that puts the onus of failure to protect consumers on regulators.

It appears now the Consumer Financial Protection Agency is not likely to be created either. Financial reform legislation is bogged down in Congress and the new agency is included in the proposals. Some consumers believe another layer of bureaucracy will not help protect their interests anyway. They may be right when you consider the way Alliance Data Systems found a way around a law not even in place yet.