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The Credit CARD Act Turns One

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One year ago many provisions of the Credit CARD Act took effect. To mark this occasion, the CFPB held a conference to examine what has happened in the past year in the credit card market. Here’s what we learned.

First, the law has brought about some important changes for consumers. For example, a study prepared by the Office of the Comptroller of the Currency indicates that prior to the Act, card issuers increased the interest rate on approximately 15 percent of accounts each year. Now, only about 2 percent of accounts experience rate increases. The amount of late fees has dropped by more than 50 percent since the Act was enacted, and overlimit fees have essentially disappeared.

There is another side of the coin. To achieve greater transparency and eliminate more hidden costs, the initial interest rates today appear to be higher than they were a year or two ago. In other words, the cost is clearer up front. Significantly, the total amount consumers are paying for their credit cards is no higher, on average, than it was one, two, or three years ago.

During the recession, credit card issuers tightened their standards for approving an application and reduced the amount of credit they made available. Over the past year, as the economy has improved, many credit card issuers have loosened their criteria for signing up new customers. Nonetheless, credit standards still appear to be tighter than they were two or three years ago. We do not yet know what the “new normal” will look like or whether less creditworthy consumers will continue to find it more difficult to obtain a credit card.

There are important challenges facing the CFPB when it comes to credit cards. We need to be vigilant in assuring that card issuers live up to their legal obligations and do not try to find loopholes to exploit. We also know that there’s more work to be done to make sure that consumers are able to understand the costs, benefits, and risks of different cards, and to compare them straight up. We need to continue to deepen our understanding of the consequences of the CARD Act for consumers and the credit card market.

David Silberman is the CFPB Assistant Director for Card Markets.

  • Get A Job

    Wow. These guys are making my point. We don’t need more regulation and another government agency.

    In his post, Mr. Silberman states:

    “Significantly, the total amount consumers are paying for their credit cards is no higher, on average, than it was one, two, or three years ago.”

    I agree it is significant. It says that consumers are paying the same for their credit card, in total, than they were one, two or three years ago.

    This tells me that the Card Act, and regulators, spent all of that taxpayer money, and make a lot of busy work, for what?

    The only people better off are the attorneys who drafted the act, the attorneys who interpret the act, printing companies who printed the new disclosures, and the bureaucrats who were hired to enforce the Card Act and for this new bureau.

    Perhaps the Card Act was more of a “jobs act” than one to improve life for consumers.

  • http://pulse.yahoo.com/_OVHEBRWB6XQALNS3OIUB65OYDM Jarrod

    Could someone please share with me how this example of our governments willingness to waste our money impacted them in a positive way?

    • http://www.theloungemusic.com The Lounge Music

      It is needed to revive the economy. It has been helping so far from what I can tell.

      • Get A Job

        Please.

        “It is needed to revive the economy”. Really?

        Increasing regulations, making credit more expensive, reducing options for borrowers, and spending hundreds of millions of taxpayer dollars is “reviving the economy”? I think not.

        The only thing the CFPB is doing so far is creating jobs for bueaucrats.

        You also state “It has been helping so far from what I can tell.” Your statements is ridiculous.

        Please give us some specific examples of how it is helping. In case you didn’t know, this new Consumer Financial Protection Bureau currently has no powers and no regulatory authority. The CFPB won’t have the ability to do anything in the regard until later this year.

        Please don’t post if you don’t know what you are talking about. You just make all of us dumber as a result.

      • Get A Job

        Please.

        “It is needed to revive the economy”. Really?

        Increasing regulations, making credit more expensive, reducing options for borrowers, and spending hundreds of millions of taxpayer dollars is “reviving the economy”? I think not.

        The only thing the CFPB is doing so far is creating jobs for bueaucrats.

        You also state “It has been helping so far from what I can tell.” Your statements is ridiculous.

        Please give us some specific examples of how it is helping. In case you didn’t know, this new Consumer Financial Protection Bureau currently has no powers and no regulatory authority. The CFPB won’t have the ability to do anything in the regard until later this year.

        Please don’t post if you don’t know what you are talking about. You just make all of us dumber as a result.

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