ICFE eNEWS #13-12 - October 21st 2013
Reports CARD Act Saved Money for Consumers
In the four years since the CARD Act was signed into law, the
cost of credit has dropped by two percentage points, but many consumers
are finding credit more difficult to obtain. These were some of
the major findings of a new report from the Consumer Financial Protection
Bureau on the effects of the sweeping credit card reform bill of
The CARD Act Report found that consumers saved $4 billion on
credit card fees last year: $2.5 billion on over limit fees and
another $1.5 billion on late fees. The CFPB says that the average
late fee has dropped $6 since the Credit Card Accountability, Responsibility
and Disclosure Act was passed.
The CFPB found that both annual fees and interest rates for credit
cards have increased since the bill passed. The average annual fee
increased from $32.48 in 2008 to $34.19 in 2012, resulting in an
additional $475 million in revenue for financial institutions. Interest
rates have risen on the front end, but there are now restrictions
on issuers increasing the interest rates once a person becomes a
The report claims the total overall cost of credit - fees, finance
charges and interest rates - dropped by two percentage points in
four years between 2008 and 2012.
"Credit cards play a valuable role in the everyday lives of American
consumers," said CFPB Director Richard Cordray in a statement. "The
CARD Act brought better consumer protections and fairness to the
marketplace, but we found there is more work to be done."
The report found that credit is still less available that it
was before the recession. Credit reached the bottom in 2009, and
has slowly increased, but has not returned to 2007 levels. The total
credit line was $200 billion less at the end of 2012 than February
2010 when the CARD Act provisions began. This may be explained by
the drop in college students with credit cards, the decline in credit
card approvals, and a decline in credit line increases.
Despite the positive findings, the CFPB still has some areas
of concern when it comes to credit cards:
• Add-on products such as debt protection, identity theft protection,
credit score monitoring, and other products that are supplementary
to the actual extension of credit.
• Fee harvester cards that charge upfront fees that exceed 25%
of a card's initial credit limit. These cards fees are not covered
by the CARD Act because a part of the fee is paid prior to account
• Credit card reward disclosures need to be made in a clear and
• Grace periods may not clearly show that if consumers carry
a balance into a new month, the interest will be assessed on the
unpaid balance from the start of the prior month.
The CARD Act was signed into law in May 2009 and made changes
to protect cardholders by preventing unexpected interest rate hikes,
curbing unfair or excessive late fees, and creating an opt-in requirement
for over limit fees. The CARD Act also forced banks and credit card
issuers to make disclosures easier to understand.