How the CARD Act is Cutting Credit Card Debt

Matt Phillips at QZ reports on, “the most important change in the US economy since the Great Recession—that nobody is talking about.” The change is the drastic decline in credit card debt among American consumers.

This decline, Phillips notes, can be largely credited with the CARD Act which Demos played an integral part in pushing through the Congress:

The passage of the US Credit Card Accountability, Responsibility and Disclosure Act—the CARD Act—in 2009 and its 2010 implementation completely reshaped the American credit card industry. Here’s some of what the CARD Act did:

  • Blocked credit card companies from extending credit without assessing the customer’s ability to pay

  • Implemented rules on marketing to people under the age of 21 to crack down abuses at college campuses

  • Limited a credit card company’s ability to levy penalty fees

  • Restricted the circumstances in which the company could jack up interest rates

And the CARD act is working. For one thing, the industry is opening far fewer accounts for people under the age of 21. In 2007 3.9 million accounts were opened for those under the age of 21. That number was 1.7 million in 2012, down 56.4%.

One study finds that the law is responsible for saving customers $20.8 billion each year. The effect is startling:

When debt service payments decrease and households have more disposable income, they can spend more on needed goods and services, stimulating the economy and creating jobs. The CARD Act helps customers pay off their debts faster and avoid costly fees.

The article also includes some bad news: student loan debt is up, as well as auto debt. This is a disturbing trend; a recent Demos report finds that $53,000 in student debt leads to a lifetime wealth loss of $208,000. Congress should pass legislation to reduce interest rates on student loans and reform bankruptcy laws to protect students who are unable to find work and pay off their debts.

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