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WASHINGTON — U.S. consumers will get long-awaited relief from some of the most costly and deceptive credit card tactics when the sweeping provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 finally kick in Monday.

The CARD Act, which President Barack Obama signed May 22, dramatically changes the way card issuers can profit from plastic. Instead of arbitrary rate increases, exorbitant fees and murky calculations of interest charges, card companies must now be more transparent in establishing and disclosing the terms of their offerings, and, as a result, more prudent in the way they manage credit risk.

In response to the law, most issuers already have introduced a host of new fees and rate structures to recoup some of the revenue they will lose under the new rules. The changes will make credit not only harder to get, but also more expensive.

For example, 35 percent of the card offers mailed to U.S. households in the fourth quarter of last year carried annual fees. That’s the highest percentage in 10 years, according to the marketing research firm Synovate. Those offers had an average annual interest rate of 13.5 percent, the highest in five years.

The CARD Act won’t silence all consumer gripes about credit cards, but it will save cardholders billions of dollars and usher in, for many, a welcome new era of tougher industry scrutiny from lawmakers, regulators, consumer advocates and customers.

"What this says to the card industry is, ‘Look, Congress has reset the playing field. The rules of the game have changed. Some of these practices that we know were harming consumers have to stop,’" said Nick Bourke, the manager of the Safe Credit Cards Project at the Pew Charitable Trusts. "Now the ball goes back to the industry, and they have to decide how to evolve their product."

The first phase of the law took effect last August. It required card issuers to provide 45 days’ notice on interest rate increases and that billing statements be mailed at least 21 days before their due dates.

The changes that will take effect Monday are much stronger. With the exception of cards that have variable interest rates, the new rules ban rate hikes on existing balances unless the cardholder is at least 60 days past due.

If delinquent cardholders pay on time for six straight months, the law requires that their higher penalty rates be lowered to their previous interest rates.

This will save cardholders at least $10 billion a year, according to Bourke. It’s the most important change for consumers because it bans a number of punitive rate hikes on existing balances, including the infamous "universal default," in which a late payment on one account can trigger a rate increase on another one.

It’s important to note, however, that lenders can still impose universal defaults and other penalty rate increases on new purchases. The CARD Act exempts only existing balances from such increases.

The new rules also require that card payments above the minimum monthly amounts go toward balances with the highest interest rates. Consent from cardholders also is required before fees can be assessed on transactions that exceed cards’ credit limits. The law doesn’t affect fees for late payments, however.

The new law prohibits a practice called "double-cycle billing," using the current and previous months’ balances to determine the finance charge. For people with prepaid credit cards, typically those with poor credit histories, the law also limits fees in the first year to no more than 25 percent of the starting credit limit.

Most cardholders already have seen the effects of the law in their February statements, which now are required to show how much it will cost and how long it will take to pay off balances by making only the minimum payment, as opposed to paying them off in three years.

Statements also must provide contact information for credit counseling services.

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Investors scored big Sunday when the New York Jets lost to the Indianapolis Colts — at least according to the Super Bowl stock indicator.

Here’s how it works. If a team that had its roots in the National Football League wins, the Dow Jones industrial average should go up. If a team from the upstart American Football League wins, stocks should go down.

The AFL merged with the NFL soon after Super Bowl III, when the AFL Jets upset the then-NFL Baltimore Colts.

In the 43 years the Super Bowl has been played, the indicator has been correct 81% of the time. That includes last year’s game, when the win by the Pittsburgh Steelers correctly predicted the rebound in stocks before many investing professionals were willing to go out on that limb.

The two NFC teams playing this Sunday — the Minnesota Vikings and the New Orleans Saints — both have NFL roots. So the stock market had to dodge only a Jets win.

Of course basing investment decisions on the outcome of a game makes as much sense as playing football without a helmet. But according to a study by George Kester, a business professor at Washington & Lee University in Lexington, Va., an investment strategy driven by Super Bowl results has done quite well.

If you’d moved into Treasury bonds following wins by former AFL teams, and back into stocks following victories by teams from the old NFL, you would have performed more than twice as well as buying-and-holding an S&P 500 index fund over the same period payday loans guaranteed no fax.

Kester said while he doesn’t believe the indicator is a wise way to make investment decisions, the better return on the Super Bowl-driven fund was "a result that would be the envy of many portfolio managers."

Of course, the Super Bowl indicator has been wrong eight times, often spectacularly so.

The New York Giants’ upset win in 2008 over the New England Patriots was supposed to bring about a bull run for stocks. Instead the Dow crashed 33.8% that year as the credit markets and banking sector imploded.

Similarly, the back-to-back wins by the Denver Broncos, formerly of the AFL, in 1998 and 1999 did little to slow the rising bubble in tech stocks. The market didn’t cool off until 2000 — after the St. Louis Rams, a team with its origin in the NFL, won the Super Bowl.

So only the most superstitious of investors should really have been cheering against Gang Green. The Super Bowl indicator is fun to talk about, but not something to be taken too seriously. 

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German consumer prices posted their highest annual gain in eight months in December after energy costs increased.

The inflation rate, calculated using a harmonized European Union method, rose to 0.8 percent from 0.3 percent in November, the Federal Statistics Office in Wiesbaden said today. That’s the highest level since April. Economists predicted prices would increase an annual 0.7 percent, according to the median of 19 forecasts in a Bloomberg News survey. From the previous month, prices rose 0.9 percent.

Crude oil prices have almost doubled in the past year, undermining confidence just as the economy recovers from the worst recession in more than six decades. While German economic growth accelerated in the third quarter, rising unemployment may prompt consumers to keep a rein on spending. The Bundesbank said this month that inflation will remain benign and predicted that unemployment will increase to 10.1 percent in 2011 from 8.1 percent today.

“Energy prices are still driving the inflation rate,” said Laurent Bilke, a former European Central Bank economist now at Nomura International Plc in London. “Underlying inflation, however, is still weak and is likely to remain so well into 2010.”

Germany’s economy emerged from the recession in the second quarter and growth accelerated to 0.7 percent in the third. Chancellor Angela Merkel’s government is spending 85 billion euros ($123 billion) to stimulate activity and the ECB has cut its benchmark rate to a record-low 1 percent as inflation risks remain contained.

‘Safely Below’

“Our interest-rate decisions are to be seen in connection with our price-stability goal, and in this context I do not see major threats for price stability in the near future,” ECB Governing Council member Ewald Nowotny said in an interview with Bloomberg News on Dec. 14. “Inflation rates will be on the positive side but it will be safely below the inflation target of the ECB.”

In the 16-nation euro area, consumer prices rose an annual 0.5 percent in November after declining 0.1 percent in the previous month. The ECB aims to keep inflation just below 2 percent. Data for December will be published on Jan. 5.

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U.S. Treasury debt prices fell on Thursday, sending 30-year yields to four-month highs, after a poorly bid long-bond auction rekindled worries over the huge federal budget deficit.

The government sold $13 billion of 30-year bonds in an auction that was weak on all measures and suffered from its year-end timing, when many financial market professionals are reluctant to commit funds for such long-term investments.

However, the gaping U.S. budget deficit will outlast the seasonal factors and some analysts worried that the sloppy long bond auction was a sign of tough times to come for a government that has tried to borrow its way out of a credit crisis.

"It was pretty ugly. The old lump of coal in the stocking," Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco.

"It is just going to be a difficult year ahead fiscally and with respect to monetary policy and also the markets. I think today’s 30-year auction could just be the harbinger," she said.

The 30-year long bond fell rapidly after the auction, pushing yields up as far as 4.51%, their highest since August.

They were last down 30/32, yielding 4.48% versus Wednesday’s close of 4.42%.

The benchmark 10-year note fell 8/32, yielding 3.47%, versus Wednesday’s close of 3.44%. During the selloff, benchmark yields rose to a four-week high of 3.52%.

However, the market recovered from its worst levels as both 4.50% 30-year yields and 3.50% 10-year rates have been seen as attractive levels by some investors to get into bonds paperless payday loans.

The 30-year auction ended this week’s three offerings totaling $74 billion. Though that’s below the weekly record of $123 billion set in October, it is a lot of debt to sell in a traditionally quiet time of the year.

"This was a sloppy reception to the long end of the curve, largely driven by the lack of players at year-end," said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co. in New York.

Though analysts blamed seasonal factors for the poor results, given that many money managers focus on bookkeeping and window dressing this time of year, it could leave the market jittery going into the new year.

The burgeoning U.S. national debt has placed extraordinary focus on bond auctions this year, especially after investors appeared to question the longevity of the United States’ prized AAA rating for a brief time back in May.

Government borrowing shot higher this year as Washington paid for bailouts of the financial sector and measures aimed at stimulating the economy amid the worst recession in seven decades.

Ironically, signs of economic recovery, such as last week’s surprisingly low job-loss figures, could put more downward pressure on the bond market as investors demand higher yields or respond to the temptation of riskier assets such as stocks. 

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Visa and MasterCard now have prepaid cards, which provide enhanced security for online shopping. They’re issued by Canadian financial institutions and sold in large retail chains, such as Shoppers Drug Mart.

But when buying prepaid cards, you have to beware of hidden baggage they carry – such as monthly fees, activation fees and expiry dates.

Mary Vandersteen ran into problems trying to use her Vanilla Prepaid MasterCard with her PayPal account.

"I only use prepaid cards for online transactions with companies I don’t know," she says, "because once the funds have been used up, the companies cannot add any more service fees or charges without my knowledge."

Needing help with a severance package, she did a Google search and found FairSeverancePay.ca. She agreed to make three deposits of $100 each with the prepaid MasterCard, which she linked to her PayPal account.

PayPal rejected the first deposit, but later accepted it when she found a staff member to help her. Then it rejected her other attempts to make a $100 payment using the same card.

"So far, I have paid $4.36 to PayPal and I can’t complete the transaction," she says.

The problem is that prepaid Visa and MasterCard gift cards can be purchased anonymously, says Darrell MacMullin, general manager of PayPal Canada.

"Whenever you add a financial instrument to PayPal, we like to make sure you are who you say you are. In this case, there was no user information associated with the prepaid card. When we check and no information comes back, it throws up a red flag in our system."

PayPal charges $1 for each attempt to authorize a payment card and refunds the fees once the card is authorized. (Vandersteen got a refund once I contacted the company.) But PayPal won’t authorize a card unless it can identify the user, MacMullin emphasizes.

Hal Whitcomb ran into problems trying to use his My Treat Visa prepaid cards, issued by Citizens Bank in Vancouver.

"These were gifts from the parents of the softball team I coach. They are advertised as just like cash," he says. "However, there’s an activation fee. There’s also a monthly administration fee after a few months. I’ve also found they have expiry dates, despite the laws that prevent expiry dates on gift cards."

Citizens Bank spokesman David Chong said Visa and MasterCard gift cards can be used anywhere that Visa and MasterCard credit cards are accepted.

"They are what we call `open network’ cards. As a result, issuers like us have to give 24/7 access to cardholders. There are significant costs to ensuring this occurs flawlessly."

Activation fees are a common industry practice to cover the expense of printing and packaging the cards, as well as to reimburse merchants, he explains.

The monthly administration fee kicks in after the first few months of ownership. However, most cardholders use up their entire card balances in one transaction or within a month or two after receiving their cards, Chong says.

As for expiry dates, Ontario and other provinces do have laws banning expiry dates on gift cards. But Visa and MasterCard fall under federal law and don’t have to abide by the provincial rules.

So, if you get a prepaid Visa or MasterCard card, try to make a major purchase right away. Don’t let them linger in your wallet, piling up fees.

Next week, we’ll dig into those online offers of "free samples," which end up enrolling you in expensive monthly plans.

eroseman@thestar.ca

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The euro zone does not risk the sort of debt problems plaguing Dubai, senior European Union officials said on Sunday.

Dubai was forced to seek a debt standstill last week, rocking global markets and reviving concerns about the fiscal health of some euro zone members, notably Greece.

Luxembourg Prime Minister Jean-Claude Juncker, who chairs the Eurogroup of euro zone finance ministers, said he saw no risk of such a default in the euro area.

European Central Bank Governor Jean-Claude Trichet “entirely” confirmed what Juncker said.

The two were speaking at a news conference after a day of talks with Premier Wen Jiabao and other senior Chinese officials.

(Reporting by Simon Rabinovitch and Chris Buckley; Writing by Alan Wheatley; Editing by Mike Nesbit)

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NEW YORK–As U.S. consumers compile their holiday shopping lists, Motorola Inc.’s Droid smartphone is expected to feature prominently, at the expense of Palm Inc.’s Pre and Research In Motion Ltd.’s BlackBerry.

Heavy marketing by Verizon Wireless will help sales of what Motorola hopes is its comeback phone, though the Droid will still lag by far the total sales of BlackBerry or Apple Inc’s iPhone, analysts say.

U.S. market leader Verizon Wireless, owned by Verizon Communications Inc. and Vodafone Group PLC, is also looking for a bit of a comeback itself, having lost market share in the third quarter to iPhone carrier AT&T Inc.

"It sounds like early feedback from Droid has been pretty positive," said JPMorgan analyst Michael McCormack. "There’s no question that we’ll see better results from Verizon" than in the third quarter.

Motorola is expected to sell 500,000 to 1 million units of the Droid in the fourth quarter, according to estimates from four analysts. That would be a good start for a company that has been losing ground to rivals for more than two years.

"Droid’s eating into competitor phone sales at Verizon," said Charter Equity Research analyst Ed Snyder, adding that Verizon’s Droid promotions are a problem for RIM.

He said that RIM does not have as exciting a product line this holiday season as it did a year ago, when the BlackBerry Storm was the highest-profile phone on Verizon’s network.

The Storm attracted attention because it was RIM’s first touchscreen phone, whereas the latest batch of BlackBerrys are mostly just upgrades of older phones, analysts said.

Reuters News Agency

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General Motors Co. will announce Monday it plans to start repaying a $6.7 billion loan to the U.S. Treasury by year-end due to modest operating improvements, a source knowledgeable about the situation said.

GM , due to unveil its first post-bankruptcy earnings report Monday, will begin making $1 billion quarterly installments on the loan on Dec. 31. At the same time, the automaker also will start repaying a $1.4 billion loan to Canada at a rate of $200 million per quarter.

GM was not required to make any payments on the U.S. loan before it matured in July 2015, but better-than-expected vehicle sales will let it start repayments much sooner than expected.

"The reason GM is in a position to do that is that they have seen performance that has been modestly ahead of what the expectation was when GM went into bankruptcy and emerged from bankruptcy," said the person, who was not authorized to speak publicly about the repayment plan.

GM vehicle sales fell off less than expected during its government-supported bankruptcy in June and July, which lasted only about 39 days. Sales since then, aided partly by government "cash for clunkers" incentives, have performed ahead of plan.

Early exit

As a result, GM has not been forced to burn through some $16 billion in taxpayer cash provided to the company when it emerged from bankruptcy. The source said GM has used only about $3 billion of these funds, which are contained in a restricted escrow account that cannot be accessed without Treasury approval.

GM will make its loan payments from the escrow account, the source said, adding that the arrangement resulted from discussions between the Obama administration’s auto task force and the GM board no credit check payday loans.

"It is consistent with the U.S. government’s focus on exiting the position as early as practicable," the source said.

The government stepped in to bail out both GM and Chrysler Group to save a key portion of the U.S. manufacturing sector from collapse amid the recession.

The $6.7 billion in senior debt is only a small portion of the more than $50 billion in taxpayer funds provided to GM. Much of this was converted to a nearly 61 percent equity stake, making the Treasury GM’s largest shareholder. Treasury officials have said they hope to sell shares in a GM initial public offering in the next year.

The source said this would not happen in the first half of the year, so the repayment plan would let GM reduce the loan by at least $3 billion "before any plausible IPO."

The repayment schedule also could be altered to accommodate IPO plans or accelerated payments, should conditions warrant.

But the source cautioned that GM’s condition was only modestly better than expected and it was not yet ready to repay the full loan amount.

"While there are modest improvements which were important and put them in the position to do this, they are at the very beginning of a difficult restructuring and are not in any way out of the woods," the source said. 

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Hitachi Ltd, Japan’s biggest electronics firm by sales, will raise up to $4.6 billion to shore up its capital, joining a scrum of Japanese firms tapping equity markets before a possible economic slowdown.

Hitachi, which is headed for its fourth straight annual loss, said it will raise up to 416 billion yen after fees, issuing 318 billion yen worth of shares and convertible bonds worth 100 billion yen.

The Monday announcement came as its shares headed for their biggest single-day slide in six months after sources told Reuters about the public stock issue, Hitachi’s first in 27 years.

Hitachi, which has a joint venture with General Electric in nuclear power, will invest in its nuclear power, software services and lithium-ion batteries operations, while trimming losses.

But Hitachi has been forced to seek money before it could form a realistic plan for recovery, some analysts said.

“This amount is the absolute limit that Hitachi can seek from markets, but this may not be enough even to cover restructuring costs at such a mammoth firm, let alone invest in growth,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co.

“I don’t think investors will want to put their money in. There are so many more deserving companies that need funds.”

The share issue would boost Hitachi’s shares outstanding by more than 30 percent.

Hitachi, like many of its once high-flying peers, has lost market share in flat TVs and digital devices to rivals from South Korea and Taiwan, and is eager to focus its sprawling operations in growth such as in lithium-ion batteries and smart grids.

A sprawling conglomerate with more than 900 group firms, Hitachi has repeatedly said it will trim losses and focus on growth areas.

It said it will use the funds it raises to boost production capacity of nuclear reactors and lithium-ion batteries, to expand its software services operations and to spend more on research on its train systems.

But Hitachi, which supplies lithium-ion batteries to General Motors, remains weighed down by losses on its flat TVs and microchips.

It must shoulder an investment of about 80 billion yen to pave the way for a merger of Renesas Technology — its chip venture with Mitsubishi Electric — and chipmaker NEC Electronics next year.

Battered by deep losses, Hitachi’s shareholders’ equity ratio has slipped to just below 11 percent, roughly half that of rival NEC Corp, which earlier this month announced it would raise up to $1.5 billion.

The ratio is calculated by dividing shareholders’ equity by total assets and is a measure of financial strength. 

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Norges Bank will probably raise its benchmark interest rate tomorrow, becoming the first European central bank to reverse monetary support measures as policy makers steer the oil-rich economy through its recovery.

The Oslo-based bank will lift the overnight deposit rate by a quarter point to 1.5 percent, the first increase in more than a year, according to 19 out of 20 economists surveyed by Bloomberg. The other forecast an increase to 1.75 percent. The bank will announce its decision at 2 p.m.

The world’s fifth-largest oil exporter came out of recession in the second quarter after investment in its petroleum industry, a stimulus package equivalent to 4.7 percent of gross domestic product and record-low borrowing costs fueled domestic demand. Prime Minister Jens Stoltenberg, whose coalition government was re-elected last month, has pledged to raise next year’s spending in excess of national fiscal guidelines even after recovery took hold.

“They are going to raise this month and I think they will raise interest rates to about 4 percent by the end of next year,” said Sunil Kapadia, an economist at UBS AG in London.

Housing, Inflation

The only Scandinavian country outside the European Union needs higher borrowing costs to offset the effect of government stimulus. The registered unemployment rate dropped to 2.7 percent in September, Europe’s lowest, and annual retail sales have grown for three consecutive months. House prices, not taking inflation into account, have returned to their pre-crisis peak from the summer of 2007, the Finance Ministry estimates.

Inflation has hovered close to the bank’s 2.5 percent target and was 2.4 percent last month, adjusting for the effect of taxes and energy. This year, the rate has exceeded the central bank’s target in six out of nine months.

“Better consumer confidence and strong government stimulus are contributing to a quicker recovery than expected,” Bjoern- Roger Wilhelmsen, senior economist at First Securities ASA in Oslo, said in a note to clients.

The krone was little changed at 8.3664 at 8:42 a.m. in Oslo. The krone has gained 7.9 percent since the end of June, making it the second-best performer of the 16 major currencies tracked by Bloomberg in the period after the New Zealand dollar.

Gains in the krone will limit the scope of rate increases, according to DnB NOR ASA, as policy makers try to balance the needs of the domestic economy against the task of supporting the country’s exporters.

Struggling Exporters

“The export sector is still struggling and a stronger krone will only weaken the sector further,” said Maren Romstad, a currency strategist at DnB NOR ASA, Norway’s biggest bank. This “will limit the room for the central bank to hike.”

Erik Bruce, Oslo-based senior economist at the biggest Nordic lender, Nordea Bank AB, expects the central bank to move “gradually,” and increase rates at every second meeting to 2.75 percent within 12 months. “They will move much more cautiously.” If the bank “moves too fast, we will surely see an even stronger krone and that will lead to a too tight monetary situation, too low inflation.”

Former Finance Minister Kristin Halvorsen on June 22 warned mortgage holders against basing home purchases on an assumption that interest rates will remain at the current record low. Central bank Governor Svein Gjedrem said on Sept. 30 that asset prices “have risen sharply and probably excessively,” characterizing policy rates as “extremely low.”

‘Warning Shot’

A rate increase tomorrow will be “like a warning shot,” Kapadia said. “They will start raising rates and try and encourage people to be a bit more cautious in their borrowing. I think it is the right thing to do.”

The country’s oil wealth has shielded it from the worst of the economic crisis, and mainland gross domestic product, which excludes oil, gas and shipping, grew 0.3 percent in the second quarter, ending six months of recession. The government expects the economy to grow 2.1 percent next year after contracting 1.1 percent this year. The jobless rate will average 3.2 percent this year and 3.7 percent in 2010.

After spending a record amount of its oil wealth this year to jolt the economy out of a trade-led recession, the government on Oct. 14 announced plans to spend even more in 2010. It will transfer 148.5 billion kroner from its $450 billion oil fund to cover the so-called structural non-oil budget deficit.

Exceeds Limit

Norway, which is also the world’s second-largest natural gas exporter, puts most of its revenue from oil and gas in a pension fund that invests abroad to avoid stoking inflation in the domestic economy. The Government Pension Fund - Global is Europe’s largest equity investor.

Expenditure guidelines stipulate the government should limit spending to the expected return of the fund, which is estimated at 4 percent. In 2010 the government will exceed the spending limit by 44.6 billion kroner, overspending for a second consecutive year.

A Norges Bank rate increase would make it the third central bank to raise rates since the global credit crisis started to ease after the Bank of Israel lifted its lending rate a quarter point in August and Australia’s Reserve Bank raised its overnight cash target rate by 0.25 point earlier this month. The bank will also publish a new set of forecasts for the economy and interest rates.

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