The Credit Card Accountability Responsibility and Disclosure Act, also known as credit card holders’ Bill of Rights, or CARD Act for short, was introduced in 2009 and met with stiff resistance from banks and credit card issuers when it was first proposed, as their lobbyists declared that credit would become more expensive as well as being harder to get access to. The CARD Act results after three years dispute this fact. And the actual results actually turned out to be mostly beneficial to consumers.
To Summaries Following are the Actual Effects
After just one year, the Office of the Comptroller of the Currency reported the following:
- Only 2% of consumers suffered rate hikes, as opposed to 15% before the law took effect.
- Late fees collected dropped from $901 Million to $427 Million, a 52% decrease that ended up in the wallets of consumers, as those late fees are now mostly limited to $25.
- Over the limit fees almost disappeared, from 12% down to 1%, since banks could no longer automatically card holders without their express consent. Opt in instead of having to opt out.
All this is due to enhanced transparency on the part of credit card issuers, and very possibly aided by cash strapped consumers who are now much more informed than previously.
Fast forward to May 2012, and think tank and research organization Demos reports that 9 out of 10 consumers now have sufficient time to react to adverse events such as late fees.One third of middle and low income are paying down their balances more rapidly, and the percentage of consumers still paying late fees has dropped to 28%, whereas it was 50% in 2009.
The only bad news is that 40% of households still has to fall back on credit cards to pay for living expenses, such as insurance or groceries, an unsurprising fact due to the high unemployment rate that has plagued the country since the meltdown.
The CARD Act was passed with students in mind, and forbid credit card issuers from offering freebies for just signing up, and furthermore restricted the areas where cards could be marketed. Issuing credit to students under 21 of age was also banned without a co signer, unless proof of sufficient income could be provided.
However, the law of unintended consequences kicked in, as the Federal Reserve interpreted a clause in the law as requiring credit card issuers to consider individual income, not household income, effectively locking out stay at home spouses, especially hitting hard spouses of military personnel, who in half of the cases are not employed.
Help is on the way, as the House Committee on Financial Services held a meeting in early June to sort out this matter. This particular clause also happens to be at odds with the Equal Credit Opportunity Act. Nevertheless, the CARD Act results after three years are mostly positive, and one way to assess this is to think of what is not happening with credit card bills, rather than what is happening with them.