Credit card holders have avoided more than $16 billion in fees over the last few years because of tighter regulation of the U.S. card market, but they are still vulnerable to aggressive collections and high costs, according to a federal consumer watchdog.
The Credit Card Accountability Responsibility and Disclosure Act, enacted in 2009 during the financial crisis, helped consumers avoid $7 billion in late fees from 2011 through 2014, according to a report released on Thursday by the Consumer Financial Protection Bureau.
At the same time, the average late fee declined 20 percent after the law required fees to be "reasonable and proportional."
The report also found consumers saved more than $9 billion in over-the-limit fees in that period, mostly because the law requires companies to notify consumers they will be charged for exceeding credit limits.
Nonetheless, the agency says it is concerned about other risks, especially as credit card usage expands with more than 100 million accounts opened in 2014 alone.
In comments he will deliver on Thursday, CFPB Director Richard Cordray describes companies that contact people as often as 15 times a day to collect bad debts.
"Even after a consumer has been reached, they may start calling again the next day. These practices smack of harassment," he says in his prepared remarks.
At the same time, some issuers rely on third-party collectors, and the bureau "has found numerous problems in the practices used by many of these debt collectors and debt buyers, including the inaccuracy and incompleteness of some of their information."
More than half of all consumers select cards based on rewards programs, but information about the rewards is often incomplete or unclear, the report found. Moreover, the companies can change the terms of the programs at any time.
Struggling credit-card holders are especially hurt by "deferred interest" promotions and by cards targeted at consumers with low credit scores, according to the report.
Those who do not pay off debts incurred under the promotions by a certain time are often charged interest retroactively, with annual rates of around 25 percent.
Meanwhile, issuers specializing in cards for consumers with subprime credit scores derive half their revenue in fees, and the extra charges can keep borrowers from paying down balances, according to the report.