Did the 2009 Credit Card Act Work?

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Over the past 4 years, credit card fees dropped, credit card applications changed and consumer satisfaction increased.

Did you notice?

If you aren’t tracking the last few years of consumer finance laws in Washington, D.C., this particular piece of legislation may have slipped past your radar. In May 2009, just a few months after the collapse of the stock market and in the throes of consumer outrage toward major financial institutions, Congress passed the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act). Whether or not you noticed, this “bill of rights” for credit cardholders likely impacted your recent experiences with credit cards. And years later, we can now definitively say it worked.

The Consumer Finance Protection Bureau (also known as the CFPB) just issued a report on how the Credit CARD Act impacted the consumer credit card market. What they found is that the Act not only saved consumers money but headaches as well.

Since 2009, over-the-limit fees and late fees have dropped as a direct result of the legislation. Many credit card agreements have become shorter and easier to understand, as credit card companies were required under the Act to clearly disclose interest rates and annual fees. Under the Credit CARD Act, consumers are also protected by “surprise” interest rate hikes that in the past were assessed at any time for any reason.

One thing the Credit CARD Act did not fix was the availability of credit. Despite steady increases over the last few years, the availability of credit has not returned to pre-2008 levels. Two types of credit card users in particular saw a dramatic decrease in available credit because of the Credit CARD Act: students and low-income individuals. The legislation requires anyone under the age of 21 to submit proof of income or have an adult co-signer if they want to open a credit card. That means that young adults and students have to find alternative ways to access credit (or ask their parents very, very nicely). The Act also requires credit cards to assess a customer’s “ability-to-repay” before they approve an application, which means that credit card companies are less likely to extend a line of credit to someone who can’t afford it.

But overall, the transparency and protection provided by the Credit CARD Act provided active credit card users with two very positive outcomes: less fees and less surprises.

About Stephanie Halligan

Stephanie is the founder of The Empowered Dollar, a site dedicated to helping millennials to fix their finances and find their stride in money and life. When she's not blogging, Stephanie is designing school curricula and online games to teach students about smart money management.

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