Card Lenders Using Deceptive Practices Hurting Their Own Bottom Lines

A study by the Center for Responsible Lending sends a message to credit card lenders that use deceptive or shady practices. The study shows that these types of actions not only hurt consumers, but the card lender’s bottom line. These practices that resulted in high-cost penalties, fees and higher interest rates were not used to lessen risk, but were often what pushed consumers into higher default rates.

Credit card companies that were more consumer friendly had lower default rates. The study was able to show that deceptive practices were a better predictor of an issuer’s losses and consumer complaints during a recession than the institution’s size, location, or size.

Although the CARD Act has ended many shady practices, many still continue. Also, the new rules do not apply to business credit cards, which the study suggests that regulators should more closely look into. The CRL also believes that the study’s findings could also apply to banks that use high-cost fees and interest rates for overdraft and payday loans.