Credit card debt has increased steadily. Since the
late 1990s, lawmakers, consumer advocacy groups, college officials and
other higher education affiliates have become increasingly concerned
about the rising use of credit cards among college students. The major
credit card companies have been accused of targeting a younger
audience, in particular college students, many of whom are already in
debt with college tuition fees and college loans and who typically are
less experienced at managing their own finances.
A 2006 documentary film titled Maxed Out: Hard Times, Easy Credit and
the Era of Predatory Lenders deals with this subject in detail. The
nonprofit group Americans for Fairness in Lending works with Maxed Out
to educate Americans about credit card abuse.
Another controversial area is the universal default feature of many
North American credit card contracts. When a cardholder is late paying
a particular credit card issuer, that card's interest rate can be
raised, often considerably. With universal default, a customer's other
credit cards, for which the customer may be current on payments, may
also have their rates and/or credit limit changed. The universal
default feature allows creditors to periodically check cardholders'
credit portfolios to view trade, allowing these other institutions to
decrease the credit limit and/or increase rates on cardholders who may
be late with another credit card issuer. Being late on one credit card
will potentially affect all the cardholder's credit cards. Citibank
voluntarily stopped this practice in March 2007 and Chase stopped the
practice in November 2007. The fact that credit card companies can
change the interest rate on debts that were incurred when a different
rate of interest was in place is similar to adjustable rate mortgages
where interest rates on current debt may rise. However, in both cases
this is agreed to in advance, and is a trade off that allows a lower
initial rate as well as the possibility of an even lower rate
(mortgages, if interest rates fall) or perpetually keeping a
below-market rate (credit cards, if the user makes his debt payments on
time). It should be noted that the Universal Default practice was
actually encouraged by Federal Regulators, particularly those at the
Office of the Comptroller of the Currency (OCC) as a means of managing
the changing risk profiles of cardholders.