Credit Card Pitfalls Possible for Users Even after New Rules

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The bulk of sweeping new credit card regulations won't take effect until February, and many card issuers are already raising interest rates and slashing credit lines.

So what will happen after the new rules take effect?

Although the rules will prohibit certain practices related to interest rates and fees, there's still room for issuers to fudge in other areas, some credit experts say.

"They're going to find loopholes in the legislation," said Curtis Arnold, founder of CardRatings.com, a credit card information Web site. "There's no way you can cover every single potential consumer topic."

For example, the new rules prohibit certain fees but "they do not put any restrictions on fees for balance transfers, cash advances or late payments," said Bill Hardekopf, chief executive of LowCards.com, a credit card Web site.

Already, some card issuers have raised their balance-transfer fees, he said.

The credit card industry says it will comply with the law passed by Congress in May.

"We at the Roundtable certainly don't condone any illegal practices and skirting of the law," said Irving Daniels, vice president of banking and securities at the Financial Services Roundtable, an industry group.

"We are strong advocates of consumer protection and safety and soundness, and we think there should be regulations and laws in place for consumer protection and safety and soundness," he said.

But Daniels said card issuers must be able to price their product according to a consumer's creditworthiness.

"There's no one-size-fits-all, no uniform plain-vanilla consumer, so when credit is issued, companies in the optimal situation should be able to determine creditworthiness based on individuals' risk profiles," Daniels said.

The industry has said that the new law will make credit tighter. "Given what has taken place and the recent legislation, we think that credit will be limited because issuers will have less of an opportunity, less flexibility, to manage risk," he said.

Although card issuers know they're under a hot spotlight, not every company will toe the line, Arnold said.

"There's still going to be a lot of dirty pool, and not every issuer is going to try to be consumer-friendly," he said. "They're going to try to find loopholes."

Arnold said InfiBank, his credit card company, notified him that it was setting a minimum rate of 15.99 percent for his annual percentage rate (APR).

"This is a classic example of a loophole," he said. "The Fed could cut rates all day long, but if your account has a floor on it, you'll never get any benefit of it. There's no verbiage in this law that talks about rate floors. …