The CARD Act, which was introduced in order to keep the credit card lenders in check, has been drawing flak from all quarters for not taking all points into consideration.
It has just been over three months since the CARD Act was introduced by the government. Though the CARD (Credit Card Accountability Responsibility and Disclosure) Act was eagerly anticipated and was positively received in the initial stages, the initial furor has ebbed away considering the various shortcomings of this act. Consumer advocates and card holders alike are disappointed that the government has failed to live up to their promises that assured customers respite from abusive practices. There are some critical flaws in the Act that is not helping the consumers repay their debts.
A senior researcher at Responsible Lending, Josh Frank, said "The act does not stop issuers from lowering lines and closing lines. Neither does it compel them to lower rates".
Despite six major credit card companies reporting a fall in the delinquency rates for the first four months this year, the write-offs are still on a high and have not seen any change even after the CARD Act has come into effect. the charge-off rates in the first quarter of this fiscal year stood at 11.12% which is the highest in recent times. The chargo-off rates that stood at 11.08% in the month of February increased to 11.21% in March.
The way in which the allocation of the payment they make takes place is the reason for the growing displeasure among the people and consumer advocates. The CARD Act was designed in order to help card holders clear off their debts fast and curtail the growing interest amount on their card. However, when the final bill came into effect, the result was not what the consumers expected.
If a customer who holds more than one card from the same bank makes a payment towards them, a smaller amount from the total payment made is allocated to the card with the higher rate of interest. The remaining goes to the card with lesser interest rate. This has irked customers who are concerned that this will in no way help them overcome the burden or burgeoning debts.
Evolution Finance`s Chief Executive Officer, Odysseas Papadimitriou, said that this is going to be particularly taxing for people who make minimum payments since the financial charges will only trend north and not help the consumer in any way.