Credit card fees, penalty rates have risen, survey says - Seattle Post Intelligencer

By EILEEN ALT POWELL/nTHE ASSOCIATED PRESS

NEW YORK -- The average late fee on credit cards has soared to $28 in the United States, while penalty interest rates average 24.5 percent, according to a survey released Thursday by Consumer Action.

The San Francisco-based consumer watchdog's report came a day after the Federal Reserve Board proposed sweeping revisions of the rules governing the way consumers are notified of changes to the terms of their accounts, including the way penalty rates are applied.

Consumer Action looked at the terms of 83 cards issued by 20 banks, including the top 10 U.S. card issuers.

The average annual percentage rate was 14.53 percent, up from 12.61 percent when the survey last was done in 2005.

That largely paralleled the Fed's boost in interest rates.

Penalty fees and rates generally kick in when consumers pay their bills late, and they've risen sharply.

This year's average late fee of $28 was more than double the $13 that prevailed in 1995 and was up from $27.46 in 2005.

Some card issuers charge as much as $39 per incident, the study found.

The penalty rates, which ran as high as 32.24 percent, were up from an average of 24.23 percent in 2005 and 21.91 percent in 2004.

Linda Sherry, a Consumer Action spokeswoman, said she did not think Fed adoption of the truth-in-lending proposals would necessarily change credit card rate and fee practices.

"But I think it will make people more aware, especially of the penalty rates," Sherry said.

One of the Fed proposals would require credit card issuers to give people 45 days notice before making any changes to the terms of an account.

That would give consumers time to repair the problem or pursue other credit options.

Among the credit card provisions that have been criticized by consumer activists is "universal default," which allows a card issuer to boost a consumer's interest rate if the consumer gets into trouble on another loan.

The Consumer Action group found that in the past year, many credit card companies are saying they no longer impose universal default rate increases.

But the group found that instead, many have inserted language into their contracts allowing them to change a customer's rate "at any time for any reason."

This, Sherry said, "means credit card companies may be hiding universal default -- one of their most insidious practices -- in a different section of the credit card contract."

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N.Z. Dollar May Gain Versus Australia's on Interest-Rate Gap

New Zealand's dollar may gain against
Australia's currency on speculation that nation's central bank
will leave interest rates unchanged today.

New Zealand's official cash rate is 1.5 percentage points
higher than Australia's 6.25 percent cash target rate. There's
just a 2 percent chance the Reserve Bank of Australia will raise
the benchmark rate at 9:30 a.m. today in Sydney, according to a
Credit Suisse index based on overnight trading in interest-rate
swaps.

``If Australia doesn't go then people will lean toward the
New Zealand'' dollar Alex Sinton, currency dealer at ANZ National
Bank Ltd. in Auckland. ``It's all about the relativity of
interest rates.''

The New Zealand dollar has advanced 7 percent against the
Australian dollar in the past 12 months. That's the biggest gain
of any major currency against the Australian dollar in that time.
New Zealand's 7.75 percent benchmark rate is the second-highest
after Iceland's among countries with the top rating at Moody's
Investors Service, helping swell demand for the local dollar.

New Zealand's dollar bought 89.56 Australian cents at 8:41
a.m. in Wellington, from 89.41 cents in late Asian trading
yesterday. It may rise to 89.80 cents if Australia's central bank
does not increase rates, Sinton said. It fell to 74.07 U.S. cents
from 74.28 cents yesterday.

RBA Governor Glenn Stevens will leave the overnight cash
rate target unchanged today at a six-year high, according to all
26 economists surveyed by Bloomberg News.

Bollard's Strategy

There is a 12 percent chance on the Credit Suisse index
Reserve Bank of New Zealand Governor Alan Bollard will boost
rates at his next monetary policy review on June 6. Bollard
boosted rates twice by a quarter-point in March and April, and
did not warn of further increases at his last review April 26.

The local dollar may extend its drop against the U.S. dollar
today as signs of more economic growth in the world's biggest
economy stokes demand for its currency, Sinton said.

The dollar rose from near an all-time low against the euro
and touched a two-week high versus the yen after a private report
released yesterday showed U.S. manufacturing strengthened last
month by more than economists forecast.

New Zealand government bonds rose after the yield on the
benchmark 10-year note fell 0.04 percentage point to 6.05 percent,
according to data compiled by Bloomberg.

The country's one-year swap spread over the U.S. rate
dropped 0.01 points to 2.86 percentage points today. The one-year
swap over Japan is at 7.33 percentage points, from 7.32 yesterday.

To contact the reporter on this story:
Emma O'Brien in Wellington at