In an 8-K filing with the Securities and Exchange Commission, Cap One said the annualized net charge-off rate in its U.S. card division (which includes domestic credit cards) increased to 6.08 percent last month. That was up from 6.07 in March and 5.5 percent in February.

Charge-offs are the value of uncollected credit card balances removed from the books and charged against a bank's loss reserves. The rate is the amount of charge-offs divided by the average outstanding credit card balances owed to the issuer.

Meanwhile, the amount of U.S. card loans 30 days past due lessened, with credit card delinquencies falling in April to 3.9 percent. Last month's delinquency rate was down from 4.04 percent in March and 4.21 percent in February.

Previously, Cap One's charge-offs had advanced in the first quarter of 2008 as delinquencies declined.   

Yesterday, Sallie Mae spokeswoman Martha Holler told me the student loan lender had already resolved a coding error that made credit alert systems think that even responsible borrowers had been delinquent with their loans. Borrowers were understandably panicked to learn their credit scores had (in some cases) dropped by more than 100 points. "This never happened before, and it will not happen again," Holler told me.

She was at least partially right: The latest problem seems to be somewhat different.

I spoke with borrower Shannon Gallagher of Providence, R.I., who has suffered through both of the Sallie Mae errors. Last Saturday, Gallagher received an alert tied to her Equifax account showing a credit score drop of 139 points. "When you see your FICO score has gone down 100 points overnight it's kind of scary," she says. "The whole rest of the evening was kind of a blur."

Gallagher had to wait until Monday to speak with Sallie Mae directly, which eventually explained the coding goof that had walloped her credit score.  

Gallagher, who is in the process of securing a mortgage for her first home, decided to buy a copy of her Equifax report. That report no longer showed the delinquency and indicated she had regained all but 10 of the points lost due to the earlier coding error. But her credit report woes weren't over.  

It also copied her Sallie Mae credit lines -- showing duplicate balances and the same date of account opening, just with new account numbers for the latest entries. Rather than overriding the existing Sallie Mae accounts, the report showed entirely new ones "effectively doubling" her installment loan debt. Having more debt could cause a mortgage lender to raise her rate, or even deny her a loan.

"Compared to my last good credit report, I have a lot of debt," Gallagher says. "I had a lot of debt to begin with and now it's doubled."

A call to Sallie Mae for comment was not yet returned.

Gallagher is not the only one to report new problems with a doubled-up balance. There are several such reports on the myFico forums. 

Temporary employees of healthcare staffing provider Nursefinders may have the answer. Nursefinders asked banking giant JPMorgan Chase to offer temporary staff a Chase payroll card that gets loaded with the day's salary as quickly as two hours after a time card is submitted.  

"While payroll cards themselves are not new, this is the first case in which a JPMorgan customer has asked us to provide cardholders with 'Daily Pay,' enabling employees to get access to salary payments more quickly," says Chase spokesman John T. Murray. "In a challenging economy, many employees value having faster access to funds in order to pay basic living expenses."

"Temporary workers can receive payments on the day that a shift is completed, giving them faster access to funds to pay basic living expenses such as groceries, gas and utility bills," says a Chase press release. "Cardholders can access their funds at automated teller machines (ATMs), receive cash back at retail locations, pay bills online and make purchases at the millions of locations that accept Visa debit cards, such as retail stores and restaurants."

The Chase payroll card also represents a solution for those Nursefinders employees who are among the nation's many unbanked Americans.   

In addition to speed and convenience, the Chase payroll card offers savings: It's free to register for one of the cards and enables workers to avoid paying check-cashing fees. Cardholders have the option of receiving pay daily, weekly, biweekly or monthly. However, "the daily pay option has been met with the greatest enthusiasm," says Nursefinders payroll manager Sandi Johnson. That isn't surprising.  

Aside from the sad acknowledgement that U.S. workers are so strapped for cash that they would otherwise be forced to borrow or use credit cards to cover even necessary items, I'm not sure I see an issue with the product itself. After all, if U.S. workers earn a paycheck, employers shouldn't hang onto the money for any longer than is necessary.  

If anything, more cash in hand should mean less reliance on consumer debt products. Isn't that a good thing? 

The proposed rules would outlaw double-cycle billing on credit card accounts, give consumers a "reasonable amount of time to pay monthly bills" and limit fees and interest rate increases on outstanding credit card balances. In addition, the rules would require banks and savings institutions to allow consumers to opt out of overdraft fees on checking accounts and ban fees assessed when debit card accounts are overdrawn because of holds placed on the accounts.

As of late Monday, more than 78 people had already filed comments about the unfair and deceptive trade practices rules, which are expected to be finalized by year's end. If approved, it would be the first time in more than 23 years that the Fed exercised its powers under the Federal Trade Commission Act to ban banks from unfair and deceptive trade practices.

A random sampling of more than three-fourths of the comments found most were from consumers who overwhelmingly support the proposed rules. A few suggested the Fed had not gone far enough in rulemaking and more was needed. None of the comments were from credit card issuers.

Here's a sampling of some of the comments already filed:

"I very strongly support this proposal. I have been the victim of credit card companies who have subjectively raised my interest rates. I have never missed a payment or failed to pay at least my minimum payment. I am quite capable of managing my finances, as demonstrated by my record. Yet, I have been shocked more than once when my rates were raised in what appeared to be an arbitrary manner. And, the largest banks are as guilty as anyone. They have demonstrated that their greed needs to be regulated."
-- Jon Kubic of Colorado

"I hope that you do, indeed, regulate the banking practices in regard to credit cards. Many people are simply being taken advantage of without fully understanding how credit cards work. As a parent, I find it intensely upsetting that these companies target college students who are, in the main, still dependent on our incomes! No one who is not fully employed should have access to credit. It was much harder to come by back in the day, but much safer for those of us who were forced to budget accordingly. Not everyone needs to own the latest gadgets. Many of us remember growing up in homes with one central line phone, one television and no credit cards. We need to return to basics."
-- Lynn Osher of Florida 

"The Universal Default Clause is a huge cheat and should be abolished. It is completely unfair to make someone default on one credit card that is in good standing, simply because a default occurred on another separate credit card. It is absolute thievery."
-- Greg Faris of Florida

"Thank you for finally doing this! While it is true that everyone needs to understand their card agreements, many do not understand the financial implications of the words on the agreements and subsequent amendments (which is really where 'they' get you!). Please be sure that you include the atrocious practice by Bank of America referred to as "Keep The Change!" They will cause great hardship on people that do not understand the time value of money and what the difference in rates (between what they're savings pays them and what they pay to Bank of America). People will see themselves saving a great deal of money -- and PAYING much, much, much more. But by that time it will be too late! Thank you, again!"
-- Corey Davis of Michigan

"I believe it is past time for increased regulation of the credit card industry. The industry is prone to predatory practices and judging by the number of offers they spew forth, an enviable financial profit margin. I find it difficult to worry about "reduced availability to credit cards" because credit cards are over-available in the current regulatory framework. In the past, I've seen credit card offers mailed to my dog, my parakeet, under-age children... not to mention the dozens addressed to myself that I have to tear up regularly. I've looked at the offers occasionally - they would be disasters for anyone who actually filled out an application. There are some good credit cards. However, the industry as a whole is tarred by a striking resemblance to the spam emails offering viagra and other enhancements. I find it odd that the financial sector has economics that support the same marketing tactics as people selling fake drugs and pornography."
-- Chris Reichardt of California

How to comment
To submit comments on the proposed rules go to the Federal Reserve's Web site and look for Regulation AA for "unfair or deceptive acts or practices," Regulation Z for Truth in Lending disclosures or Regulation DD for Truth in Savings overdraft fee rules.

The comment period closes 75 days after the proposed rules are published in the Federal Register, but that date had not yet been set as of Monday.

So let them know what you think.

See related: "Agencies propose sweeping changes to credit card practices," "Fed to release new credit card regulations this week," "Fed: Expect credit card regulations this spring," "Regulation Z: Fed moves to change credit card rules," "House introduces Credit Cardholders' Bill of Rights," "Timing is everything for some credit card payments" 

I'll explain.

As our Jeremy Simon reported yesterday, the Federal Reserve's monthly G19 report on consumer credit showed that credit card spending had surged. The Fed's revolving debt category, which is 98 percent comprised of credit card debt, rose to an annualized rate of 7.9 percent.

The Fed's data are backed up by a new release from Discover Financial Services, which conducts a monthly survey called the Spending Monitor Index. This month's index, also released May 7, shows spending is up overall, and the survey asserts that it's because people are spending a lot more on necessities. They're reining in spending on discretionary items, and expect to continue to do so.

"Hardest hit by the slump in economic growth have been people with incomes under $40,000. They are much less optimistic about the economy and their personal finances than higher income groups, and they are feeling the effects of increased prices more dramatically," the Discover survey said. "The highest percentage of people who are spending more on necessities and less on discretionary items are people who make less than $40,000."

The Discover survey does not measure whether that increased spending comes from savings, from current income -- or from borrowing on credit cards.

Some people clearly are reaching for their credit cards out of desperation. Our own CreditCards.com survey back in December found that nearly 12 percent of Americans expected to have to borrow to pay for their winter heating bills.

With the downturn in home values, many Americans no longer have the ability to borrow from home equity in tough times, so it's tempting to say that the economy may be heading over a cliff because people are borrowing just to eat and drive to work -- an unsustainable situation.

But there are also indications that some of that increased credit card spending isn't only because there's no other option -- it's just increasingly convenient to reach for the plastic.

Papa John's pizza chain had one such cheery announcement. On May 7, the chain proclaimed that its online pizza ordering business had surpassed the $1 billion mark in total sales, with an annualized growth rate of 50 percent. A lot of that is paid for on credit cards. And while pizza is certainly food, ordering it online via a credit card isn't exactly a sign of desperation, or the start of a full economic meltdown. It's just pizza.

This series of posts show why it's hard to stop and prosecute credit card and identity theft cybercrimes, by focusing on one wildly successful international card fraud ring and its flamboyant alleged leader, Dmitry Ivanovich Golubov.

Part 1 - The secret history of CarderPlanet.com and Dmitry Golubov

Screenshot of CarderPlanet.com (Click to enlarge)

The FBI worked for years before successfully bringing down CarderPlanet.com -- a well known Web site where identity thieves and hackers around the globe gathered to share tricks of their illegal trade.

The site launched May 2001, registered with a fake technical contact claiming to be in Ho Chi Minh City, Vietnam. The site grew rapidly, and went viral in certain virtual criminal communities as the go-to place for buying, selling and trading secrets about how to make money from stolen credit card numbers and identities.

According to the FBI, the site's ringleader went by the alias "Script," and, conspiring with other online criminals, Script brazenly collected and distributed computer viruses intended to steal personal information from unsuspecting computer users. This quickly made him, and CarderPlanet.com, popular and trusted among other cyber criminals.

More brazen, still, Script launched an advertising campaign for the CarderPlanet.com Web community. This made the site as accessible as it was useful for fraudsters profiteering off stolen account numbers.

CarderPlanet.com operated in plain sight of international law enforcement authorities (and pretty much anyone with an Internet connection searching for key terms.) The multimillion-dollar price tag it inflicted on United States financial institutions made the site of particular interest to U.S. FBI, Secret Service and Postal Inspection Service authorities.

Discussions on the site's forums were conducted primarily in Russian, but it also had forums for English-speaking users. Hundreds of scam artists joined the forum, and tracking who was responsible for the site's upkeep was a process of elimination for authorities trailing carders. Interpol and U.S. authorities joined forces on the hunt, and by culling through the registered users on the site and comparing criminal history records with information from EBay, Microsoft and other huge players in the computer industry, they mocked up a who's who of the Internet's most infamous crooks. They still had little hard evidence for the identity of "Script," and their who's who list was essentially a bunch of aliases with proxy Internet locations that turned up vacant if authorities went for a physical search.

U.S. authorities made several arrests in cooperation with the Russian and Ukrainian governments in 2004, including the arrest of multiple individuals who were caught red-handed selling or traveling with counterfeit credit cards and stolen identities. Several of the individuals arrested named Dmitry Ivanovich Golubov as Script.

It took about a year to convince Ukrainian authorities to arrest Golubov. They raided four of his addresses, which the alleged part-time student at Mechnikov University in Odessa, Ukraine, had used for business.

In July 2005, they finally made an arrest. While raiding his apartment in Odessa they found three computer hard drives and other electronics equipment that had been cooked in a wok, as well as a "raskat," the Russian name for a remote electromagnetic pulse generator that removes all digital information from electronic storage devices, such as computers.

Four months later, in December 2005, two Ukrainian politicians came to Golubov's aid, convincing a Ukrainian judge to release Golubov on the grounds that they had no substantial evidence that he was, indeed, Script or that he had any illegal equipment or stolen information in his possession.

Here's the real twist: Upon his release from jail, Golubov announced he was going into politics by starting a political party called the Internet Party of the Ukraine. He also began a public relations campaign explaining his case to the blogosphere. He claims to have been the victim of identity theft and is petitioning the Ukrainian government to return the possessions they took from his apartment -- including the raskat device and three computers he claims were not connected to the Internet.

Next up: Notes from the underground: The next generation of carders

According to the latest Federal Reserve release on consumer credit, revolving credit (of which about 98 percent is comprised of credit card debt) surged at an annual rate of nearly 8 percent in March. That marked a significant increase from February's gain of 5 percent. With the latest increase, revolving credit climbed to $957.2 billion from $950.9 billion the month before.

(Click to enlarge.)

Overall consumer credit (revolving and nonrevolving) leapt 7.2 percent in March to $2.55 trillion.

Unfortunately, the increase in credit card usage may not be by choice, with consumers forced to put higher-priced necessities on plastic: March consumer spending data showed that expenditures rose on more costly food and energy prices, even as growth in household income slowed.

Earlier this week, the Federal Reserve survey of senior loan officers indicated that although banks tightened their standards for credit cards in the first quarter of 2007, demand for consumer loans actually increased.