Today the Consumer Financial Protection Bureau (CFPB) released its annual assessment of the CARD Act, a landmark 2009 credit card reform bill. Before the legislation went into effect, banking industry lobbyists argued that the regulation would inevitably raise credit card rates, choke off the availability of credit, and harm more people than it would help.
Six years after the bill’s passage, these woes have not come to pass. Instead, the CFPB’s report finds that consumers are paying less for their credit cards than they did before the law, with dramatic savings on fees resulting in a total cost of credit nearly two percentage points lower than it was before the enactment of the CARD Act. Far from being choked off, credit availability has continued to expand for consumers, increasing 10 percent since 2012 with new accounts growing faster than the adult population.
Overall, consumers have saved $7 billion in late fees and $9 billion on over-limit fees—an especially pernicious “gotcha” fee that was virtually banned by the new regulation. In a 2014 data brief, Demos found that the reduction in over-limit fees especially benefitted African American and Latino households with credit card debt.
The CFPB points out that more than 60 percent of American adults own at least one credit card account, and use these cards—a lot. In the first six months of 2015, more than 14.5 billion credit card transactions accounted for more than $1.4 trillion in purchase volume.
Contrary to the warnings of industry lobbyists, the CARD Act is working successfully to make credit cards safer and more fair. And Demos is proud to have played a crucial role in making the CARD Act a reality, drawing on our long research expertise on the impact of credit card debt on American families.
The success of the CARD Act should make us think twice about knee-jerk denunciations of regulation, from the minimum wage, to environmental protection, to efforts to stop discrimination. We should also recognize the value of the Consumer Financial Protection Bureau itself, which is now under renewed attack from financial companies that would prefer to cheat consumers with greater impunity. Now more than ever, Americans need the financial protections and oversight the CFPB provides and should protect this vital agency from efforts to weaken it.