Credit union cards more fair, report says

Oct. 29, 2009 – Credit union-issued credit cards comply more closely than bank cards with federal guidelines against unfair or deceptive practices and could be used as a benchmark in future rulemaking, according to a report from the Pew Charitable Trusts.

Released Wednesday, the Pew report detailed a study of 400 credit cards issued by the 12 each of the largest banks and credit unions and compared the terms of cards offered in July 2009 and December 2008. It reviewed the cards for compliance with the Federal Reserve Board UDAP guidance issued last year.

All of the credit cards issued by the 12 largest banks employ practices that are considered unfair or deceptive under that guidance, according to the study. Further, the cards’ terms would not meet the provisions of the Credit Card Accountability, Responsibility and Disclosure Act, it said.

The report also noted that although the 12 largest credit unions control just 1 percent of overall credit card lending (compared to 90 percent for their banking counterparts), they offered prices that were generally lower than those at the largest banks.

In addition, the study found that credit union cards carry less severe penalties than banks. In fact, it said nearly half of credit union cards didn’t impose penalty rates, and more than three-quarters of credit unions set penalty rates that would meet the Federal Reserve’s fairness rules.

The report went further, suggesting that the Federal Reserve consider credit union cards as benchmarks as it creates new “reasonable and proportional” penalty rules that are required by the Credit CARD Act.

The report also said the median advertised interest rates on credit union cards were between 9.9 percent and 13.75 percent annually, depending on a consumer’s credit profile. This range is about 20 percent lower than comparable bank rates, it noted.