The CARD Act: What Happens When Congress Steps Up

The CFPB released a report this week that should serve as a reminder of what a functional Congress could accomplish. The report highlights the ways in which the 2009 Credit CARD Act has succeeded. Their findings:

• Late fees must be be reasonable and proportional to the violation of account terms, a rule resulting in a $1.5 billion decrease in fees in 2012.
• Overlimit fee for transactions that put cardholders over their credit limit, saving $2.5 billion in overlimit fees since 2008.
• Americans under the age of 21 can only get a credit card if they demonstrate an independent ability to repay the debt or they have a cosigner over 21. As a result, the percentage of young adults ages 18-20 that have a credit card account has dropped by half.

Amy Traub and Catherine Ruetschlin’s survey of low- and middle-income household year, which was submitted to the CFPB as a statement on their report, similarly showed how the CARD Act increased the transparency of credit card statements and dramatically reduced unfair and excessive fees and penalties.

Sunlight is the best disinfectant. The underlying issues driving Americans to credit remain, but, all told, the act demonstrates that good rules to ensure the markets function better have a huge impact on ordinary people. That’s why it’s important we celebrate the act. This kind of policy really doesn’t happen often enough.