Consumer bureau begins new look at credit card rules
CFPB to re-examine 2009 CARD Act
Are credit card users still falling victim to deception or unfair practices that should be outlawed?
That's what the Consumer Financial Protection Bureau will be looking into, starting now. The watchdog agency launched a call for comment last week as part of a study on the effects of the Credit CARD Act, which was signed in May 2009. Consumers, as well as card issuers and industry analysts, are invited to give their views.
The bureau "is seeking to understand
how the credit card market is working in practice and how the CARD Act changes
have affected consumer and credit card issuers," CFPB Director Richard
Cordray said in a statement.
|Credit card issuers increased card rates before and right after the passage of the CARD Act, according to national average rates compiled by CreditCards.com.
A major provision of the law prohibited rate increases on
existing balances for consumers with up-to-date payments. The law also restricted
over-limit fees and late fees, as well as increases in card rates during the
first year an account is open.
One of the questions the agency wants to explore is the cost
and availability of credit. In the debate over the law, industry advocates
argued that restrictions on card issuers would pull back their offerings,
increasing costs for consumers.
The consumer bureau found in 2011 that the law had mostly halted
rate hikes on existing accounts, while reducing late fees and over-limit fees.
Now the agency is looking at the effect of changes in
pricing, marketing or other practices by card issuers; whether the cost and
availability of credit has declined or riskier customers have been shed.
Rates rise on new card offers
During the debate leading up to the act's passage, industry officials predicted it would result in higher rates for everyone, and for new card offers, that has come true.
According to CreditCards.com's rate survey of 100 credit cards, minimum rates
in new card offers posted by issuers rose from the
11.5 percent level during the year before passage of the CARD Act (whose full
name is the Credit Card Accountability Responsibility and Disclosure Act of
2009.). They continued to rise during 2009, jumping about a percentage point to 14 percent in the weeks before the law took effect in 2010. Since then they rose gradually
to the 15 percent neighborhood, where they have leveled off.
Supporters of the act point to a different set of rates: those actually paid by people carrying credit card balances. Federal Reserve figures on those rates show a decline since 2009. Banking groups attribute at least part of the decline to some consumers losing
access to credit cards.
Consumers who want to submit comments may do so by mail or online:
By mail -- Address comments to Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1700 G St. NW, Washington, D.C. 20552. Refer to the docket number CFPB-2012-0048.
- Electronically -- Go to http://www.regulations.gov/, search for docket CFPB-2012-0048, and follow instructions for submitting comments.
Earlier stories: Winners, losers three years after CARD Act's passage, Creative new fees escape CARD Act, A guide to the Credit CARD Act of 2009
Published: December 27, 2012