On May 22, the 2009 CARD Act celebrated its fifth birthday. But studies done on the consequences of the law suggest that borrowers are the ones receiving the gifts.
The act, which went into effect in 2010, included provisions that both made it easier for consumers to understand their credit card bills and more difficult for issuers to hike rates or fees without telling cardholders.
One of the more influential studies on the consequences of the Act—which reviewed more than 160 million credit card accounts—found that card costs and rates dropped, without limiting access to credit.
“We estimate that the CARD Act fee reductions have saved U.S. consumers $12.6 billion per year,” wrote the study’s authors, who hailed from the National University of Singapore, the Office of the Comptroller of the Currency, University of Chicago Booth School and New York University. Moreover, borrower’s APRs fell, “by an annualized 1.7%, with a decline of more than 5.5% for consumers with FICO scores below 660.”
Other findings further demonstrate the success of the Act. The Consumer Financial Protection Bureau, which enforces the Act, recently found that, “overlimit fees and repricing actions have been largely eliminated,” and “the dollar amount of late fees is down as well.” In 2012, according to the CFPB, consumers saved $4 billion in late fees alone. (The report did find that the dollar amount of total available credit limits was less than before the recession, due in part to fewer credit cards among college students.)
Demos’s 2012 National Survey on credit card debt of low- and middle-income households found that, “one third of households say they are responding to new information included on credit card statements by paying their balances down faster.” Meanwhile, 28% of households reported paying late fees in 2012, down from 52% in 2008, and nearly three in 10 said credit cards hiked their rates after a late payment in 2012, compared to 53% four years earlier.
Sounds like pretty good reason for consumers to be celebrating this financial milestone.