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STATE – A study funded in part by the Port Authority of New York and New Jersey finds that a planned trans-Hudson passenger rail tunnel will boost home values near train stations on NJ TRANSIT lines by $19,000 on average.

The Access to the Region’s Core project being built by NJ TRANSIT and the Port Authority of New York and New Jersey will expand rail capacity into New York City and allow passengers on the Main Line, Bergen County Line, Raritan Valley Line, Pascack Valley Line, and Port Jervis Line to travel to Manhattan without transferring trains.

The study by the Regional Plan Association finds that homes in New Jersey and New York near train stations on the NJ TRANSIT system and MetroNorth’s Port Jervis and Pascack Valley lines will increase in value by $19,000 on average if they are within two miles of train stations and by $29,000 for homes within walking distance.

Cumulatively, this increase in home value will be an astonishing $18 billion, creating a higher tax base and relieving pressure to increase tax rates in communities across New Jersey and New York. The report also shows that, because ARC shortens commuting times, the number of people who live west of the Hudson River within a reasonable (50-minute) commute of Midtown Manhattan will double when ARC is completed, expanding the workforce for New York City’s highest-value businesses.

“There is not a more clear-cut instance of a project with tremendous public benefits that will improve the region for decades to come,” said Bob Yaro, President, Regional Plan Association.

Critics argue that New York residents will unfairly gain benefits from the project without supporting it financially.

“New York is going to see financial benefit but is not putting in one dime to the cost of this tunnel,” said Jeff Tittel, Director of the New Jersey Sierra Club. “This tunnel will benefit land speculators but not commuters.”

Tittel criticized the ARC Tunnel for failing to meet its all of its original goals. It does not create access to the east side of Manhattan and it will not be used as a backup tunnel for Amtrak. Earlier this summer Amtrak announced that they will be building their own tunnel to Penn Station. They will not use the ARC tunnel because it won’t allow for through service.

“Why do we need two sets of tunnels to do the same thing? The Amtrak tunnel will work the ARC tunnel won’t,” said Tittel. “This is still the tunnel from Xanadu to Macy’s basement, except now it seems that it will benefit Macy’s more than Xanadu.”

The Regional Plan Association report, entitled, “The ARC Effect: How Better Transit Boosts Home Values and Local Economies,” is based on a statistical analysis of 45,000 home sales within two miles of train stations of three recent improvement projects to the NJ TRANSIT system: Midtown Direct Service on the Morris & Essex Line, the Montclair Connection for the Montclair-Boonton Line and Secaucus Junction, which serves the Pascack Valley and Main/Bergen/Port Jervis Lines. Cumulatively these projects increased the value of nearby homes by an average of $27,000 per home; $40,000 if the home was within walking distance of train stations.

A detailed comparison of the trip time reductions brought on by these three projects with the trip time reductions expected from ARC reveals that ARC could raise home values by a cumulative $18 billion, generating $375 million a year in new property tax revenue for municipalities. This growing tax base will relieve pressure for municipalities to increase tax rates.

The report also shows that ARC will double the number of west of Hudson residents who are within a 50–minute train ride to Midtown, where wages paid are significantly higher than in the suburbs. The number of people within 70 minutes of Midtown will increase by 25%. This extraordinary improvement in access will have significant positive economic impacts for families and municipalities across New Jersey and New York.

“Past NJ TRANSIT improvement projects, such as Midtown Direct, Montclair Connection and Secaucus Junction, have boosted local economies and home values, and ARC will too,” said Juliette Michaelson, report author and Senior Planner, Regional Plan Association. “The project will be a terrific economic boon to the region, providing better access to high-paying Manhattan jobs to New Jersey residents, and improving New York businesses access to the New Jersey labor pool. In fact, it is difficult to see how the region can grow without the improvement in access that ARC represents,” continued Michaelson.

“Property value increases is just one of the long-term economic benefits of ARC, which also include an overall increase in the region’s economy, new jobs on both sides of the Hudson, higher personal incomes, higher commercial property values, and reductions in driving, highway congestion and air pollution,” said Thomas K. Wright, Executive Director, Regional Plan Association.

Construction of ARC has already begun and is scheduled to be completed by 2018. Recently, hearings concluded on use of Eminent Domain for the project. Total expected cost is approximately $9 billion dollars, with funding from the federal government, the State of New Jersey and the Port Authority of New York and New Jersey. The project is currently fully funded.

ARC involves the construction of a second trans-Hudson commuter rail tunnel that will connect NJ TRANSIT’s existing rail network and MetroNorth’s Port Jervis and Pascack Valley Lines with a new terminal station at 34th Street in Manhattan. For several train lines that currently terminate in Hoboken or Newark Penn Station, ARC will provide new, direct service to Midtown. For those lines that already terminate at Penn Station-New York, ARC promises to significantly increase the frequency and reliability of service.

“ARC is New Jersey and New York’s biggest investment in transit ever. It will double the number of trains that can travel every morning into Manhattan, the region’s economic engine, from west of the Hudson River, the region’s fastest-growing pool of commuters to Manhattan,” said Robert Freudenberg, RPA’s newly appointed New Jersey Director. “Going forward, NJ TRANSIT, Metro-North, municipalities, and the state of New York and New Jersey should work together to optimize ARC’s benefits for the most residents possible. The economic development and quality-of-life potential that improved transit provides can best be harnessed by building new, transit-oriented, mixed use, and economically diverse development around train stations,” continued Freudenberg.

The report findings were heralded by fellow transit groups.

“Not only will ARC add critical new capacity to New Jersey’s rail system, this report shows that it will encourage walkable, transit-oriented development that will allow the state to grow and accommodate new residents sustainably. Though it will be years before the tunnel is completed, now is the time for the state and municipalities to plan for this tremendous opportunity,” said Peter Kasabach, Executive Director of New Jersey Future.

“Commuters and businesses in this region want transit access because of its economic, environmental, and social value. ARC is one of the most important examples of how solid transit investment by federal and local agencies reverberates numerous benefits to the region,” said Kate Slevin, executive director of Tri-State Transportation Campaign. “With transit use in the region projected to grow significantly, this report proves that ARC will keep our region’s economy strong and robust.”

Recent growth in the region has consumed most of the existing transit capacity and this growth is expected to continue. There is no capacity in the auto crossings, in the exclusive bus lane leading to the Port Authority Bus Terminal or in the existing century-old commuter rail / intercity rail tunnel leading into Penn Station. PATH and ferry capacity does exist but those systems are poorly positioned to attract many added riders.

The complete report can be found on the web at http://www.rpa.org/pdf/RPA-The-ARC-Effect.pdf; appendices at http://www.rpa.org/pdf/RPA-The-ARC-Effect-Appendices.pdf.

EAST RUTHERFORD – New Jersey’s industrial real estate market through the first half of 2010 showed renewed progress following a couple of challenging years, according to commercial real estate services firm Cushman & Wakefield, Inc. Whether the shift can be traced to more realistic landlord expectations, the state’s strong fundamentals in an improving economy, positive trends in manufacturing and inventories, or a combined “all of the above,” the net result is encouraging.

Year to date, Central New Jersey recorded 3.5 million square feet of new industrial lease deals, equivalent to totals recorded at second quarter 2009; Northern New Jersey experienced a 400,000-square-foot uptick from the same time period, recording 2.9 million square feet in total. The cumulative 6.4 square feet of new leasing activity is on par with totals recorded last year at this time, according to Cushman & Wakefield’s New Jersey research services team.

Within this context, Cushman & Wakefield’s industrial brokers closed 1.1 million square feet of new Garden State leases and renewals during the first six months of the year. Highlights included:

• Menlo Logistics’ 221,331-square-foot renewal at 24 Engelhard Drive in Monroe Twp.;
• Production Resource Group’s 203,771-square-foot commitment at 915 Secaucus Road in Secaucus;
• Suite K Value Added Services Inc.’s 178,502-square-foot lease at 120 Herrod Boulevard in South Brunswick; and
• Exel Logistics’ 130,205-square-foot lease at 251-259 Kapkowski Drive in Elizabeth.

“In this climate, industrial property owners and their brokers really need to be aggressive to get deals done,” noted Stan Danzig, an executive director at Cushman & Wakefield’s East Rutherford office. “We all have become more creative, more responsive and more realistic. This approach is paying off, because more deals are beginning to come together.”

Cushman & Wakefield’s mid-year research findings showed a second quarter direct triple net weighted average asking rental rate of $5.92 per square foot for New Jersey industrial product. This represented a $0.54 per-square-foot year-over-year decline, yet only a $0.10 per-square-foot decline from last quarter.

Frank Caccavo, a Cushman & Wakefield executive vice president based in Edison, noted that, despite this rental fluctuation, overall available industrial space for Northern and Central New Jersey combined remained fairly flat. The overall vacancy rate at the end of the second quarter stood at 11.1 percent. As context, the national industrial vacancy registered 10.6 percent at mid year, according to Cushman & Wakefield’s national industrial research team.

“The New Jersey market, despite the depression in prices, is less volatile than some areas of the country,” Caccavo said. “New leases are absorbing space in an overbuilt inventory – especially at Exit 8A – and land constraints are keeping additional development in check. From a ground-level perspective, it feels like the market has been bouncing along bottom for some time but has truly started to turn around.”

The New Jersey industrial market long has benefited from its central location in the northeast corridor, highly evolved transportation infrastructure and port facilities, and reputation as one of the nation’s leading industrial real estate hubs. “New Jersey is integral for the United States industrial landscape in so many ways, especially in its positioning to distribute goods along the eastern seaboard and into the Midwest,” noted Cushman & Wakefield’s Jim Dieter, SIOR, executive vice president, Industrial Brokerage, U.S.

Nationwide, positive trends in manufacturing and inventories suggest that the industrial recovery will continue to gain momentum, according to Dieter. “The Institute of Supply Management’s Manufacturing Index is coming into 10 straight months of improvement,” he said. “We also are seeing that the universal ‘destocking,’ or inventory reduction, that has taken place among major companies through the down cycle is beginning to end. The New Jersey industrial footprint today is mainly a big-box distribution center, and that should benefit from this progress.”

Looking ahead to the remainder of 2010, Cushman & Wakefield anticipates continued steady – albeit slow – progress for the New Jersey market. For the long-term, the state is well positioned for forward progress. “Today’s core industrial markets include the presence of intermodal hubs, stable supply and demand factors, liquidity, diversification, and market depth,” Dieter noted. “They also generally feature superior infrastructure with international airports and container ports. New Jersey fits this profile in every way.”

TRENTON – Legislation intended to spark economic development by increasing the number and types of businesses eligible to benefit from tax exempt purchases in Urban Enterprise Zones is advancing in the New Jersey Legislature.

Under current law, sales of tangible personal property, except motor vehicles and energy, and sales of services, except telecommunications and utilities, to a qualified business for the exclusive use or consumption of that business within a UEZ are exempt from the sales and use tax at the point of sale if the business is a “small qualified business” with annual gross receipts of less than $10 million.

Qualified UEZ businesses with annual gross receipts equal to or greater than $10 million are also eligible for the exemption, but are required to pay or remit the applicable sales or use tax on qualified purchases and submit a claim for refund to the Division of Taxation in the Department of the Treasury within one year of the date of the transaction.

This bill (A-1559) extends the point of sale sales tax exemption to zone-located qualified businesses.

Under its provisions, businesses that have been determined and certified by the Director of the Division of Taxation in the Department of the Treasury to have a business location or locations exclusively within a UEZ are eligible to forgo the rebate process, regardless of the size or the amount of annual gross receipts generated by the business during the prior annual tax period.

The bill was approved 69-10 by the Assembly in June and has now been referred to the Senate Economic Growth Committee.

WASHINGTON, D.C. — The Federal Reserve Board announced this week that it is seeking nominations for appointments to its Consumer Advisory Council.

The Council advises the Board on the exercise of its responsibilities under various consumer financial services laws and on other matters. Its membership represents the interests of consumers, communities, and the financial services industry. The group meets in Washington, D.C., three times a year.

The Board plans to appoint up to ten members for terms that will begin in January 2011. Appointments are typically for three years. However, the duration of members’ terms may be subject to change pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Board will continue to use the Council’s advice and expertise during the implementation of the Act.

Nominations should include a résumé and the following information about nominees:

• full name, title, address, telephone and fax numbers, and email address;
• organization’s name, brief description of organization, address, and telephone and fax numbers;
• past and present positions, dates, and descriptions of responsibilities;
• knowledge, interests, or experience related to community development and reinvestment, consumer protection regulations, consumer credit, or other consumer financial services; and
• positions held in community and banking associations and on councils and boards.

Nominations should also include the nominator’s name, organizational affiliation, title, address, telephone and fax numbers, and email address. Individuals may nominate themselves.

Letters of nomination with complete information, including a résumé for each nominee, must be received by September 10, 2010. Nominations not received by September 10 may not be considered.

Electronic nominations are preferred. The appropriate form can be accessed at:

https://www.federalreserve.gov/secure/cacnomination/

If electronic submission is not feasible, the nominations may be mailed (not faxed) to Joseph Firschein, Assistant Director and Community Affairs Officer, Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System, Washington, DC 20551.

For further information, contact Jennifer Kerslake, Secretary of the Council, at (202) 452-6470.

STATE – For the second week in a row, the federal Department of Labor reported a drop in the number of new unemployment claims filed in New Jersey.

New Jersey had 2,103 fewer initial unemployment claims filed during the week ending July 17. Officials said that there were fewer layoffs in the transportation, warehousing, service and manufacturing industries.

New York and Pennsylvania also reported fewer new claims. New York saw 19,552 fewer, because of a decrease in layoffs in the transportation and services industries. Pennsylvania reported a decrease of 3,390 due to fewer layoffs in the automobile and manufacturing industries.

WASHINGTON, D.C. — Are you opening a new business this summer? The IRS has many resources available for individuals that are opening a new business. Here are some tax tips the IRS wants new business owners to know.

First, you must decide what type of business entity you are going to establish. The type of business entity will determine which tax form you have to file. The most common types of business are the sole proprietorship, partnership, corporation and S corporation.

The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.

An Employer Identification Number is used to identify a business entity. Generally, businesses need an EIN. Visit IRS.gov for more information about whether you will need an EIN. You can also apply for an EIN online at IRS.gov.

Good records will help you ensure successful operation of your new business. You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.

Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used.

Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.

IRS Publication 583, Starting a Business and Keeping Records, provides basic federal tax information for people who are starting a business. This publication is available on IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676).  Visit the Business section of IRS.gov for resources to assist entrepreneurs with starting and operating a new business.

Photo credit: TheTruthAboutCreditCards.com

By Jason Alderman

If you’ve got teenagers heading off to college soon, I hope you’ve done a good job educating them about the importance of personal financial responsibility and how to build a strong credit history. If not, better do it now.

College freshmen and young adults entering the workforce encounter many unfamiliar expenses – and temptations – so it’s important to help them avoid early financial missteps that could damage their credit for years to come.

Probably the most fundamental tool for helping students manage their finances is a checking account with a debit card. A few tips:

• Look for a bank or credit union that charges no monthly usage fee, requires no minimum balance and has conveniently located ATMs so they don’t rack up foreign ATM charges.
• Enter all transactions in the check register or use a digital tool like www.mint.com and review the account online weekly to know when transactions have cleared.
• Avoid writing checks or making debit card transactions unless the current balance will cover them.

One way to build credit history is through responsible use of credit cards. The 2009 Credit CARD Act requires that people under age 21 now must have a parent or other responsible adult cosign on any credit card account unless they can prove sufficient income to repay the debt.

Although this new policy probably will prevent many young adults from amassing more credit card debt than they can afford, it may also make it more difficult for them to begin building a credit history. A couple of alternatives are available to parents:

• Make them an authorized user on one of your accounts. They’ll get their own card and you can usually restrict the amount they can charge. Authorized users are not legally responsible to pay balances owed – that’s your responsibility, so tread carefully.
• You can add them as a joint account holder to a new or existing account – preferably, one with a small credit limit. Joint account holders are equally liable to pay off the account.
• Just remember, any account activity, good or bad, goes on both your credit reports, so careful account monitoring is critical.

Those who haven’t yet demonstrated financial maturity may not be ready for an unsecured credit card or loan. Two alternatives include:

• A secured credit card linked to an account with the card issuer to which they deposit money. Typically, users can charge up to the deposit amount, which can be replenished. Then, after a period of on-time payments, they can ask the lender to convert it to an unsecured card, or at least add an unsecured amount to the account.
• A prepaid debit card, where you load the card with money in advance and they use the card for purchases or ATM withdrawals. You monitor account activity online or by phone.
• With each, fees and restrictions may apply so shop around for the best terms.

If you need help educating your kids about personal financial management, a good resource is What’s My Score (www.whatsmyscore.org), a financial literacy program for young adults run by Visa Inc. It features a comprehensive workbook called Money 101: A Crash Course in Better Money Management, which can be downloaded for free.

Jason Alderman directs Visa’s financial education programs. To Follow Jason Alderman on Twitter: www.twitter.com/PracticalMoney

WASHINGTON, D.C. — Small nonprofit organizations at risk of losing their tax-exempt status because they failed to file required returns for 2007, 2008 and 2009 can preserve their status by filing returns by Oct. 15, under a one-time relief program, the Internal Revenue Service announced Monday.

The IRS posted on a special page of IRS.gov the names and last-known addresses of these at-risk organizations, along with guidance about how to come back into compliance.  The organizations on the list have return due dates between May 17 and Oct. 15, 2010, but the IRS has no record that they filed the required returns for any of the past three years.

“We are doing everything we can to help organizations comply with the law and keep their valuable tax exemption,” IRS Commissioner Doug Shulman said. “So if you do not have your filings up to date, now’s the time to take action and get back on track.”

Two types of relief are available for small exempt organizations – a filing extension for the smallest organizations required to file Form 990-N, Electronic Notice (e-Postcard), and a voluntary compliance program (VCP) for small organizations eligible to file Form 990-EZ, Short Form Return of Organization Exempt From Income Tax.

Small organizations required to file Form 990-N simply need to go to the IRS website, supply the eight information items called for on the form, and electronically file it by Oct. 15.  That will bring them back into compliance.

Under the VCP, tax-exempt organizations eligible to file Form 990-EZ must file their delinquent annual information returns by October 15 and pay a compliance fee.  Details about the VCP are on the IRS website, along with frequently asked questions.

The relief announced Monday is not available to larger organizations required to file the Form 990 or to private foundations that file the Form 990-PF.

The IRS will keep the list of at-risk organizations on IRS.gov until Oct. 15. Organizations that have not filed the required information returns by that date will have their tax-exempt status revoked, and the IRS will publish a list of these revoked organizations in early 2011.  Donors who contribute to at-risk organizations are protected until the final revocation list is published.

The Pension Protection Act of 2006 made two important changes affecting tax-exempt organizations, effective the beginning of 2007.  First, it mandated that all tax-exempt organizations, other than churches and church-related organizations, must file an annual return with the IRS.  The Form 990-N was created for small tax-exempt organizations that had not previously had a filing requirement.  Second, the law also required that any tax-exempt organization that fails to file for three consecutive years automatically loses its federal tax-exempt status. The IRS conducted an extensive outreach effort about this new legal requirement but, even so, many organizations have not filed returns on time.

If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.

Photo credit: David Reber

WASHINGTON, D.C. — The Internal Revenue Service issues a list of the top 12 tax scams each year – known as the Dirty Dozen. The scams are illegal and can lead to problems for taxpayers including significant penalties, interest and possible criminal prosecution.

These scams don’t just happen during the tax filing season, they can happen anytime during the year. Here are five scams from the 2010 Dirty Dozen list every taxpayer should be aware of this summer.

1. Phishing: Phishing is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information in an electronic communication. Scams can take the form of e-mails, tweets or phony websites and they try to mislead consumers by telling them they are entitled to a tax refund from the IRS and they must reveal personal information to claim it. Regardless of how official this e-mail may look and sound, the IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Phishers use the personal information obtained to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name. If you receive an e-mail that you suspect is a phishing attempt or directs you to an imitation IRS website, please forward it to the IRS at phishing@irs.gov. You can also visit IRS.gov and enter the keyword phishing for additional information.

2. Return Preparer Fraud: Dishonest tax return preparers can cause trouble for taxpayers who fall victim to their ploys. Such preparers are skimming a portion of their clients’ refunds, charging inflated fees for tax preparation or are attracting new clients by promising refunds that are too good to be true. To increase confidence in the tax system, the IRS is requiring all paid return preparers to register with the IRS, pass competency tests and attend continuing education.

3. Hiding Income Offshore: Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks and brokerage accounts. IRS agents continue to develop their investigations of these offshore tax avoidance transactions using information gained from more than 14,700 voluntary disclosures received last year. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans.

4. Abuse of Charitable Organizations and Deductions: The IRS continues to observe the misuse of tax-exempt organizations. This includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets. The IRS also continues to investigate various schemes where donations are highly overvalued or the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets.

5. Frivolous Arguments: Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. The IRS has a list of frivolous legal positions that taxpayers should avoid on IRS.gov. These arguments are false and have been thrown out of court.

For the full list of 2010 Dirty Dozen tax scams or to find out how to report suspected tax fraud, visit IRS.gov.

Photo credit: TheTruthAboutCreditCards.com

WASHINGTON, D.C. — Most of the practices deemed “unfair” or “deceptive” by the Federal Reserve have disappeared from new credit card offers since federal passage of the Credit CARD Act last year, according to a new report by the Pew Health Group’s Safe Credit Cards Project. Yet new trends have emerged that could cost cardholders significantly.

The report finds that issuers have eliminated practices such as “hair trigger” penalty rate increases (disproportionate charges for minor account violations), unfair payment allocation, and raising interest rates on existing balances. However, Pew’s research also highlights a sharp rise in cash advance fees, continued widespread use of other penalty interest rates and an emerging trend of credit card companies failing to disclose penalty interest rates in their online terms and conditions.

“While it’s been less than a year since passage of the Credit CARD Act, the new law appears to be working for millions of Americans who have credit cards,” said Shelley A. Hearne, managing director of the Pew Health Group. “The elimination of most of the ‘unfair’ or ‘deceptive’ practices of the credit industry since we last surveyed the marketplace marks a major milestone in the move to make credit cards safer, transparent and more fair for consumers. Most of the news is good, but we are seeing the rise of new harmful behavior.”

The study, Two Steps Forward: After the Credit CARD Act, Cards Are Safer and More Transparent—But Challenges Remain, is the latest in a series of reports from the Pew Safe Credit Cards Project that has examined all consumer credit cards offered online by the nation’s 12 largest banks and 12 largest credit unions. Together these institutions control more than 90 percent of the nation’s outstanding credit card debt. For this latest report, which measures how the industry has changed since the passage of the Credit CARD Act, Pew gathered data in March 2010 on nearly 450 cards. Full details, including previous research, can be found at www.pewtrusts.org/creditcards.

Key findings show:

• Many of the most troublesome practices of the credit card industry have been eliminated. A credit card issuer can no longer unilaterally decide to raise interest rates on existing balances. Likewise, practices including “hair trigger” penalty rate increases, unfair payment allocation, and overlimit fees without prior consent are a thing of the past. Earlier Pew research found that before the implementation of the law, 100 percent of the credit cards surveyed included at least one of these practices.
• Beyond the requirements of the new law, there are new practices that benefit consumers. Less than 25 percent of all cards examined had an overlimit fee, which is down from more than 80 percent of cards in July 2009. Additionally, mandatory arbitration clauses, which can limit a consumer’s right to settle disputes in court, are now found in 10 percent of cards compared to 68 percent in July 2009.
• Predictions that legislation would spawn the growth of new fees have yet to materialize. There was minimal change in the number of cards that include an annual fee (down 1 percentage point from July 2009 to March 2010). During that period, the median size of these fees increased from $50 to $59 for banks and from $15 to $25 for credit unions.
• Some disclosures stopped including the size of penalty interest rates even as issuers reserved the right to impose them. At least 94 percent of bank cards and 46 percent of credit union cards came with interest rates that could go up as a penalty for late payments or other violations. But nearly half these warnings failed to inform the consumer of the actual penalty interest rate or how high it could climb.

“Although we applaud changes by the card industry to create a fairer and more transparent marketplace, our research shows that some challenges remain,” said Nick Bourke, director of Pew’s Safe Credit Cards Project and report co-author. “For the first time, we have seen credit card disclosures warning consumers that interest rates could go up as a penalty for certain actions, but not stating how high those rates could go. Federal regulators should pay attention to this problematic new trend. When issuers withhold vital pricing information, it leaves cardholders in the dark and puts their financial security at risk, which is why federal regulations have long required issuers to disclose their rates and fees up front.”

Two Steps Forward includes a number of policy recommendations to address new challenges, including:

• Federal bank regulators should enforce existing regulations that require companies to disclose full and reliable credit card penalty rate information.
• The Federal Reserve should prohibit issuers from charging penalty interest rates that are higher than initially disclosed when the consumer opened the card account.

The report also shows that surcharge fees for cash advances rose sharply between July 2009 and March 2010. Bank cash advance and balance transfer fees increased on average by one-third during this period, from 3 percent of each transaction to 4 percent. Credit union cash advance fees went up by one quarter, from 2 percent to 2.5 percent.

Other pricing data is also included in the report, showing recent increases in a variety of credit card interest rates and fees.