March 7, 2007 -- In a move that could help consumers, Congress will hold hearings today to discuss the tricky fees and the baffling penalties that credit card companies use to keep their consumers paying off high interest rates and finance charges month after month.
The hearings have banks and credit card companies howling in protest.
Take the example of Derek Lee, who paid off one of his credit cards because he wanted to cancel it. Six months later, he still hasn't been able to because the card company keeps charging him mysterious fees that keep the account open.
"It's incredibly frustrating. It's unfair and it's unethical, and it has dropped my FICO credit score [a measure of credit risk] by 69 points," Lee told "Good Morning America."
Lee is not alone. A recent Government Accountability Office investigation targeted numerous moneymaking tactics used by credit card companies.
Ever heard of trailing interest? It's when a credit card company charges interest on your entire purchase, even when you've paid it off.
What about a universal default? That's when a consumer makes a late payment on one card, but other card companies use that as an excuse to raise interest rates.
And with lowest interest first policy, card companies charge consumers multiple rates for different types of transactions, but only the lowest rate purchases get paid off first, making the high-interest items last longer.
And last but not least is the written agreement, which leaves most consumers scratching their heads. Many fees charged by credit companies are not listed in the written agreement, and even government investigators find them incomprehensible.
Sen. Carl Levin, D-Mich., was so outraged by the GAO report that he called hearings, even though his committee on homeland security and government affairs is not the typical forum for consumer matters.
"It's been a long time coming," said Travis Plunkett of the Consumer Federation of America. "Congress clearly has been asleep at the switch, until now."
In a statement to "GMA," the American Bankers Association said that credit cards were an important part of the American economy, but that the disclosures that came with them needed to be updated to reflect how modern credit cards had changed.