The Credit CARD Act has caused higher interest rates and lower
availability of cards -- especially for new users and people trying
to re-establish their credit, the American Bankers Association said
Feb. 19 in a comment letter filed with the Consumer Financial
"While the CARD Act has provided clear and significant benefits
to consumers, there have also been significant tradeoffs,
specifically, higher costs and less availability for credit card
credit," the lobby group for banks said in the
, signed by ABA Senior Vice President Nessa Feddis.
Those benefits include the near elimination of surprise rate
hikes and a rollback of late fees and over-limit fees, the ABA
Enacted in May 2009, the Credit Card Accountability
Responsibility and Disclosure Act's major provisions took effect
Feb. 22, 2010, three years ago Friday. The consumer bureau is
taking comments -- some of which contradict the ABA's findings --
for a study on the consumer protection law's results.
A pullback in subprime cards may be forcing more people into
higher-cost forms of credit such as payday loans, the ABA said.
Although the financial crisis and subsequent recession also hit
since the law took effect, "economic conditions alone can't explain
the changes we've seen in the credit card market," ABA Chief
Counsel Kenneth Clayton said in a
that accompanied the association's filing.
Since late 2008, when lenders began anticipating the CARD Act,
rates for home and auto loans have fallen sharply while credit card
rates have risen about three-quarters of a percentage point, the
association said, citing an analysis by Argus Information and
However, other analyses show a different picture. Looking at
Federal Reserve figures, a study by the Center for Responsible
Lending found that card interest rates initially rose, but then
returned to about pre-CARD Act levels.
In addition, mortgage rates have benefited from federal economic
programs to keep rates low and bolster the housing market.
Feddis said that the wide spread between rates on card loans --
at about 14.5 percent for mature accounts -- and other types of
consumer credit raises the question of whether the CARD Act was a
factor. Auto loan rates are down about 2 percentage points
and mortgages more than 2.5 points, the association said in its
comment letter. Card rates should have fallen too, Feddis said,
since the risk of card lending has declined as subprime customers
So what is the CARD Act's bottom line for consumers? "It depends
on who you are," Feddis said. "When their limit is lowered or their
account is closed, people get very upset."
The banking group isn't arguing to roll back the law, but is
recommending caution to examine unintended consequences before any
further consumer protection measures, she added.
A guide to the CARD Act of 2009
Consumer bureau reviews credit card law