Nearly three out of four Americans want the government to regulate the credit card industry more closely, according to the new national CreditCards.com poll.
|"Taking Charge" survey: Part 1 of 3
- Part 1: Three out of four Americans agree the government should regulate credit cards and 82 percent say the cards are essential to their lives.
- Part 2: How credit cards are changing the way Americans live.
- Part 3: Managing credit cards and relationships.
The second annual CreditCards.com "Taking Charge" telephone poll, conducted by GfK Roper, also uncovered the paradox credit cards present for many Americans: While 82 percent feel credit cards are essential to have and provide a valuable service, a majority of Americans (58 percent) say they don't trust credit card companies and 56 percent say they've been disappointed by a credit card. For many people, there's a love-hate relationship with the plastic in their wallets.
More regulation needed?
"It's a shame that something that Americans rely on every day is so complex. The government at least ought to make them products that are more easy to understand," says Tim Westrich, a researcher at the Center for American Progress, a Washington, D.C., think tank. He notes that the economic downturn has forced many families to rely on credit cards to pay for everything from gasoline to food to utilities.
"Credit cards can be a convenient pressure valve for families to take the pressure off of their everyday expenses. That's why reform is so necessary," Westrich adds. "It really cries out for better regulation."
But banking officials say more regulation will lead to unintended consequences that many consumers cannot afford, namely higher interest rates for all credit card users and fewer people able to get credit.
...It will make this essential product too expensive for many consumers.
|-- Peter Garuccio,
spokesman, American Bankers Association
"The numbers that demonstrate that 82 percent of respondents see credit cards as essential is very telling," says Peter Garuccio, public relations director for the banking industry trade group American Bankers Association (ABA). "The concern with what policymakers are considering is that it will make this essential product too expensive for many consumers."
"Taking Charge" is a yearly CreditCards.com snapshot of public opinion on Americans' use of, spending habits, management and understanding of credit cards. The poll randomly called 1,001 adults between June 4 and 26, 2008. The margin of error is plus or minus 3 percentage points for the full sample. (See poll methodology.)
The key poll findings:
- 73 percent of Americans somewhat agree or strongly agree that the government should regulate the credit card industry more closely.
- 82 percent say it is essential to have a credit card today with the same percentage saying credit cards provide a valuable service.
- 76 percent feel there's always a "catch" that makes a credit card less attractive than the credit card company makes it sound.
- 78 percent say no one really reads the terms and conditions when they sign up for a credit card.
- A majority of people (58 percent) don't trust credit card companies.
- 56 percent have been disappointed by a credit card that turned out not to be as good as they expected.
Respondents were read statements about credit cards. For each statement they were asked to indicate if they "strongly disagree," "somewhat disagree," "somewhat agree," or "strongly agree."
|The government should regulate the credit card industry more carefully
(Click on the 'Graphs' tab at the top of the page for more charts with detailed survey findings.)
The finding that nearly three in four Americans favor more regulation comes in a year of intense congressional scrutiny of the credit card industry, record consumer complaints and an unprecedented proposal by federal banking regulators to establish consumer protections against "unfair or deceptive" practices.
The Federal Reserve Board has proposed banning "surprise" interest rate hikes, limiting fees and giving consumers a reasonable time to pay their monthly credit card bills. Banking industry representatives have called the proposals an intrusion on competition that would lead to higher interest rates and fewer people receiving credit cards. The Fed has said it will finalize the proposed new rules by year's end.
"The outrage has just been building. It's something that's finally coming to a head now," says Linda Sherry, national priorities director for Consumer Action, a San Francisco-based nonprofit advocacy coalition. Sherry says she was surprised that 58 percent of poll respondents said they didn't trust credit card companies. She expected the figure to be higher. "We are just completely inundated by credit card complaints," Sherry says. One in three consumers contacting her agency for help has credit and finance related problems.
"The public is fed up, and it's time for Congress to enact credit card reforms that will put an end to unfair, deceptive and abusive credit card practices," U.S. Sen. Carl Levin said in an e-mailed statement in response to the CreditCards.com poll.
Levin co-sponsored a credit card regulation bill in the Senate called the Credit Card Accountability, Responsibility and Disclosure Act of 2008 or CARD Act of 2008. The bill, introduced July 10, proposes stiffer billing, marketing and disclosure rules for credit card companies.
David Jones, president of the Association of Independent Consumer Credit Counseling Agencies (AICCCA), adds: "The credit card industry has been given ample opportunity to police itself."
The fine print
The federal Truth in Lending Act's Regulation Z dictates how and where consumers receive information about the terms and conditions of their credit card agreements. But there's a major problem. As the 2008 "Taking Charge" poll shows, 78 percent of people agree that no one really reads the terms and conditions when they sign up for credit cards. This sentiment is up slightly from the 2007 poll, when 71 percent felt no one really reads the terms. Consumer advocates and others say this fine print information is written in difficult-to-understand legalese.
"I have a hard time wading through it and this is my specialty," says Chi Chi Wu, a consumer attorney for the National Consumer Law Center in Boston. "How do you expect someone who may not have gone to college" to understand it?
I have a hard time wading through it and this is my specialty.
|-- Chi Chi Wu,
consumer attorney, National Consumer Law Center
The Fed has been working on beefing up disclosure requirements for credit card applications, solicitations and monthly statements for nearly four years. Reg Z disclosure requirements are among those expected to be finalized by the end of the year.
Says the ABA's Garuccio: "The fact that 78 percent of respondents say they don't really read the terms and conditions probably lends itself to feelings of mistrust and further demonstrates the need for greater financial education and more meaningful disclosures...We've said many times the disclosures can and should be improved."
However, Wu and others feel disclosure is not enough to protect consumers. "Better disclosure is only going to tell them better how they are being abused," Wu says.
Likelihood of change
Jones, from the credit counselors group, says those three in four Americans hoping for more government intervention with credit cards may be disappointed if they are counting on congressional action. Although a pro-consumer credit bill -- the Credit Cardholders' Bill of Rights -- survived a key hurdle in the House Financial Services Committee July 31, many Democrat and Republican committee members expressed doubt that it can pass when it goes to the full House or in the Senate.
Adds Jones: "The ABA and the large credit card companies have tremendous amount of clout and the very best people in the business lobbying on Capitol Hill. We're fighting some huge and powerful lobbies and I don't know if that can be overcome or not."
Obviously people are upset with the current state of affairs.
|-- Tim Westrich,
Adds Ed Mierzwinski, consumer program director of the U.S. Public Interest Research Group (PIRG): "The bank lobbyists are running around D.C. back and forth between the Fed and the Congress like their hair is on fire, trying to stop reasonable regulation that's all their own fault."
He says: "We'd never have convinced either the Fed or the House Financial Services Committee to act except that the banks pushed too far ... Change is in the air."
Westrich, from the Center for American Progress, says the "Taking Charge" poll results may support the argument for even more regulation than is currently under consideration. "With numbers like these, I think you need something more than what the Fed has proposed. Obviously people are upset with the current state of affairs."
Growing credit card dependence?
The 2007 and 2008 CreditCards.com polls hint that Americans are growing more dependent on credit cards. According to the 2008 "Taking Charge" poll, eight out 10 people feel they "provide a valuable service" and that "it is essential to have a credit card today." The 2007 poll found 56 percent of Americans agreed that credit cards were a "necessary evil" and 44 percent believed they were "an indispensable part of life."
Need proof that credit cards have become essential to American life? Try buying a plane ticket with cash, says Wu, "They'll put you on a terrorist watch list."
The 2008 "Taking Charge" survey was conducted June 4-26, 2008, by GfK Roper Public Affairs on behalf of CreditCards.com, via random digit dialing phone interviews with 1,001 interview subjects. Interviewees were approximately split between males and females ages 18 and over, with 562 females and 438 males surveyed. The raw data was then weighted by a custom designed computer program that automatically developed a weighting factor for each respondent, employing five variables: age, sex, education, race and geographic region.
The total margin of error on weighted data for the full sample is plus or minus 3 percentage points at the 95 percent confidence level.
The 2007 "Taking Charge" survey was conducted March 5-18, 2007, by GfK Roper via random digit dialing of 1,004 adults.