When the Credit Card Accountability Responsibility and Disclosure (CARD) Act was enacted it was designed to put an end to some of the practices used by credit card companies that negatively impacted consumers. But now that three months has passed since the CARD Act was signed into law, many debtors are still finding themselves exploited by credit card companies determined to increase their profits using loopholes in the new law.
When the CARD Act was proposed initially there was a mandate that payments made by debtors would be allocated in its entirety to the balance with the highest interest rate allowing the debtor to pay off their credit card debt quickly. However, that provision of the law was weakened and now the CARD Act states that credit card issuers are only required to apply payments above the minimum payment requirement to the balance with the highest interest rate. For example, if a debtor's minimum payment requirement was $40 and they made a $50 payment, that additional payment could be applied to the high interest balance while the $40 payment went on the low interest balance. So technically a debtor could end up paying on their credit card debt for a longer period of time because low interest loans were paid off first while high interest loans continue to grow.
Another loophole that credit card companies are exploiting is their ability to raise their minimum payment requirements whenever they like as long as it isn't more than twice the current minimum payment percentage. By raising the minimum payment the credit card companies can effectively avoid paying high interest loans first because most debtors will be unable to pay more than the minimum payment required. And it is important to note that a credit card company is not limited in how much of a minimum payment they can require. For example, if a debtor's minimum payment was 5 percent of their balance last year, the credit card company would have the right to increase the minimum payment percentage to no more than 10 percent, effectively requiring some debtors to pay hundreds of dollars on their credit card debt each month.