Oct. 28 (Bloomberg) -- None of the credit cards offered online by the 12 largest U.S. banks would meet requirements of new federal curbs on the industry’s rates and fees, a report from the Pew Charitable Trusts said.

All of the cards surveyed used practices considered “unfair or deceptive” by the Federal Reserve, according to the report released today by the Philadelphia-based nonprofit organization. The study examined almost 400 cards advertised by banks and credit unions and compared terms for cards offered in July 2009 and December 2008.

The Credit Card Accountability Responsibility and Disclosure Act, which takes effect in stages, will require banks to apply payments to higher-rate balances first, limit rate increases and ban practices such as “universal default,” or raising rates based on a missed payment with another lender. Most of those rules are scheduled to begin Feb. 22; others took effect Aug. 20, 2009, and some such as limits on gift-card fees are set to start Aug. 22, 2010.

“Our research shows the most harmful practices the card act targets remain widespread,” said Nick Bourke, manager of Pew’s Safe Credit Cards Project, which began studying how the industry treats consumers in 2007.

Cardholders haven’t benefited from historically low interest rates, even though the Fed lowered the federal funds rate to near zero to ease lending for banks, the report said. Credit cards became more costly for American families in the first half of 2009, which makes them a potentially dangerous part of most Americans’ financial lives, according to the report.

Advertised Rates

The number of cards that allowed issuers to change interest rates at any time increased to 99.7 percent from 93 percent, the report said. Lowest-advertised interest rates rose by more than 20 percent, while highest-advertised rates increased 13 percent.

Discover Financial Services had the largest increase in percentage points for its lowest-advertised rates, rising to 12.99 percent from 9.99 percent. Bank of America Corp., the second-biggest card lender after JPMorgan Chase & Co., showed the biggest jump in highest-advertised rates, to 18.24 percent from 14.99 percent, the report said.

Ninety percent of cards surveyed would impose penalties for over-the-limit-transactions or late payments, including so- called hair triggers of one or two late payments a year. Ninety- five percent of the cards allowed issuers to apply payments to balances in a way that would cause financial harm to consumers, the report said.

Hair Triggers

“As of Aug. 20, card issuers are now required by law to give customers 45-day advance notice of any increase in their APR, or other significant terms, and must also give customers the option to decline the increase and pay off the balance over time. The days of so-called hair-trigger repricing ended then,” said Peter Garuccio, a spokesman for the American Bankers Association in Washington, in an e-mailed statement.

The study also found that penalty charges on cards issued by the 12 largest credit unions were less frequent and less severe than at banks. Credit-union cards offered lower advertised rates of 9.9 percent to 13.75 percent annually, compared with 12.24 percent and 17.99 percent for bank-issued credit cards. Credit unions account for 1 percent of credit-card lending, according to the report.

Annualized card write-offs dropped to 10.72 percent in September from 11.49 percent in August, Moody’s Investors Service said in a report Oct. 22. Loans at least 30 days delinquent, an indicator of future losses, rose to 5.97 percent from 5.8 percent. Loans 30 to 59 days overdue, or “early stage” delinquencies, rose to 1.66 percent from 1.65 percent.

Freeze Rates

Christopher Dodd, a Connecticut Democrat who heads the Senate Banking Committee, introduced a bill on Oct. 26 to freeze interest rates on existing credit-card balances after bankers said they may struggle to comply with a House bill that seeks to move up the effective date for some provisions of the new law to Dec. 1 from Feb. 22.

The card law already limits interest-rate increases, and an immediate freeze on interest rates would force banks to cut back on lending, said Kenneth J. Clayton, senior vice president and general counsel for card policy at the ABA.

“In the end, it’s consumers and small business that will suffer,” Clayton said in an e-mailed statement before the Pew study was released.

The House Financial Services Committee last week approved a bill that would advance the law to Dec. 1. Representative Barney Frank, the committee chairman and a Massachusetts Democrat, has said lenders have been using the implementation period to add fees and raise interest rates.

“Once the legislation is fully enacted, pricing transparency will lead to competition, which will lead to rates finally falling,” Bourke said.

To contact the reporter on this story: Alexis Leondis in New York aleondis@bloomberg.net.

Last Updated: October 28, 2009 10:40 EDT