Tighter regulations on consumer disclosures? Protection of young consumers? New rules for so-called “promotional” interest rates? A ban on universal default and double-cycle billing? Did you think that credit card companies would take this lying down? President Obama’s Credit Card “Bill of Rights” (aka the Credit CARD Act of 2009) was hailed by consumers as a much needed reining in of the wily tactics of big lenders, but, understandably, lamented by the companies whose bottom-lines relied on said nefarious scheming.

Opponents of consumer credit reform argued that credit card companies needed to charge high fees to untrustworthy borrowers in order to subsidize the amazingly low rates that they give to their responsible cardholders. And if you don’t like it, you can simply take your business elsewhere. Any changes to this model, they claimed, would necessitate higher fees for everyone, rather than just those few bad apples. Whether their reasoning is sound or not will always be a point of contention, but now that the Act has been signed into law (effective February 2010), it seems that the lenders are practicing what they prophesized.

Good news! We’re cutting your rewards!

One of the stipulations of the Act was to provide clearer, less ambiguous language in disclosures. You might think this would pose a challenge for credit card companies when they had to break it to their longtime customers that they were cancelling Christmas. In spite of that, they found a way: the old “present bad news as if it were good” trick. In April, I received an envelope from Chase that said, “Good Things are Coming from  Chase Freedom.” Check out what was inside below: a letter announcing “new ways to get cash back.” They were quite up ront about the newness, but not so much about the fact that the changes were for the worse.

Chase Freedom was one of the best cards on the market because of its 3% cash back for your top 3 or your 15 spending categories. That, though, is now a thing of the past, with rewards now chopped down to 1% on purchases. Also out the window: a $50 bonus for redemptions over $200. Some cardholders are even reporting a new $30 annual fee which is graciously waived for the first year.

Again, sympathizers for credit card companies are telling customers to switch cards if they are so unhappy with their nerfed rewards. But it seems that the decapitation of heady perks is pandemic.

Conflict of interest

What do you do when the law bans retroactive interest rate hikes? Launch a preemptive strike. The Washington Times reported that Citigroup jacked up the interest rate on 15 million accounts this month in anticipation of the new rules. Chase is doing it, too apparently – Kristy here at MasterYourCard.com saw her interest rate skyrocket from 11.5% to 27% for virtually no reason.

Senator Chris Dodd fired off a concerned letter to the Chairman of the Federal Reserve stating that he was “disturbed” by the preemptive rate hikes and urged him to do “everything in [his] power to protect cardholders from these abusive practices.” Let’s hope someone listens.

A swipe at retailers

The Credit CARD Act of 2009 protects consumers – retailers and business owners, however, have been fair game. Every time a customer buys with plastic, a merchant is charged a “swipe fee by the bank. This fee is usually between 2 and 5 percent, but has been steadily rising – revenues from such “swipe fees” have gone up by 120% since 2001. The credit honchos say the bigger charges are justified in an increasingly riskier environment. Critics of the fees argue that that’s the credit card companies’ problems, since they are the ones that handed plastic out like candy in the first place.

At any rate, a battle has sparked between merchants and lenders with the lynchpin being the Credit Card Fair Fee Act which would let merchants negotiate better swipe fees. The retailers’ efforts are being spearheaded by 7-Eleven Inc., which is gathering up signatures for a petition. The Electronic Payments Coalition (consisting of the likes of Visa and Mastercard), on the other hand, claim that retailers are simply trying to pocket the money from lower fees and have no intention of passing the savings along to consumers. Whatever happens, it’s unlikely to spell out good news for cardholders.

Down or up ?

Bloomberg reported recently that JPMorgan and Bank of America were replacing  some of their fixed interest rates cards with variable rates. The theory, say the credit card companies, is that when things are good for them, they’ll cut you a break. But when money is tight, they’ll go ahead and pass along the bigger fees. Variable rate credit cards have been around for some time, but the nix on bait and switch tactics (such as offering low introductory rates that change after a few months) will likely up the effort to market such products. Who takes the brunt of the adjusted rates remains to be seen. But all of this has an eerie resemble to a similar push for adjustable rate mortgages a few short years ago – a move that was treat unforgivably by the subprime fallout, to say the least.

What can you do?

A course of action for blighted credit cardholders is a bit fuzzy now. These next few months are going to be a rough ride – but ultimately, they’re likely to be growing pains of a more stable credit card industry, rather than death throes. Many cardholders are looking around for better deals, but the chances of the rug being pulled out by the new lender are equally as great. The best advice: hang in there. Spend responsibly as you always should and don’t panic. The Act does have one heartening light at the end of the tunnel: lenders must review your account after six months when they increase your interest rate. If all payments have been on-time, they are obligated to return it to the previous lower level. Hopefully, this item – and the rest on Obama’s agenda – will be enforced with regularity.

Related posts:

1. The Lenders Strikeback Pt. 2: More Credit CARD Act Loopholes
2. Got a Credit Card? Vote Obama!
3. Obama proposes Credit Card ‘bill of rights’
4. New Rules for February: College Students Won’t Be Receiving Any Valentines from Credit Card Companies in 2010
5. Credit Card Review: Chase Freedom