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BOA’s new rules defy CARD act

[Wednesday, March 16th, 2011]

One of the reports by the Associated Press suggests that Bank of America recently declared its plan to levy annual fees of $59 on certain credit card accounts. The spokespeople for this bank also announced that the accounts for which these new fees will be applicable will be decided based on multiple factors such as FICO scores, payment track record and consumer risk.

Though this may seem technically legal, there are chances that it may be considered to be against the regulations of the CARD Act implemented in 2009 and early part of 2010. According to this act, no bank is allowed to arbitrarily increase the interest rates on the existing credit card account unless the card holder defaults on the payment for two consecutive months. Though Bank of America is technically not increasing the interest rates, it is making up for the loss of revenue by implementing credit card fees on existing accounts.

Levying annual fees or financial charges arbitrarily is tantamount to increasing credit card interest rates because they have the same effect on the card holder. It is imperative that banks and other credit card lenders understand the fact that the CARD Act came into effect to prevent them from baiting customers with excessive fees and interest rates. If an increasing number of banks follow in the footsteps of the Bank of America, there are chances that the regulations will be modified further to allow the Federal Reserve to place a limit on the annual fees as well.

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