Official CFPB report shows Maloney’s CARD Act saved $16 billion for American consumers

Dec 3, 2015
Press Release

WASHINGTON – Six years after Congresswoman Carolyn B. Maloney’s (D-NY) Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act) took effect, consumers have saved more than $16 billion dollars, according to a new report released today by the Consumer Financial Protection Bureau.

“The CARD Act has been a win-win for consumers. Not only has the CARD Act put $16 billion back into the pockets of middle-class Americans, as this important report shows, but it has also increased access to credit, and lowered the cost of credit for consumers.”

Since the reform law, total costs to consumers have fallen with the elimination of certain back-end pricing practices such as over-limit fees. Over the same period, credit has generally become more available to consumers and the number of new accounts has grown faster than in almost every other major consumer credit market. Concerns remain, however, about other back-end practices such as deferred-interest promotions that can hit consumers with unexpected costs.

More than 60 percent of adults own at least one credit card account. 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. Before the CARD Act, widespread back-end pricing practices racked up costs for consumers through hidden fees and other gotchas. Signed into law in May 2009, the CARD Act created a fairer and more transparent market by protecting consumers against unexpected interest rate hikes, excessive late fees, and hard-to-avoid over-limit fees. The CFPB assumed authority for the CARD Act in July 2011.

The CARD Act directs the CFPB to regularly review the credit card market and the impact of the law’s rules. This is the CFPB’s second report. Today’s report finds that, generally, consumers are paying less for their credit cards than they did before the law, and those costs are easier to predict before they are incurred. In addition, credit availability has continued to expand for consumers. Specifically, the report found that since the CARD Act:

Consumers have avoided more than $9 billion in over-limit fees: Before the CARD Act took effect, card issuers charged back-end fees that consumers might not discover until they owed the money. Card issuers could authorize transactions that put consumers over their credit limit and then charge a typical $35 over-limit fee. The CARD Act effectively eliminated these fees by requiring companies to get an affirmative opt-in from consumers to be charged for exceeding their credit limit. Had these fees continued at their pre-CARD Act level, consumers would have paid $9 billion more from the beginning of 2011 through to the end of 2014.

Consumers have saved more than $7 billion in late fees: The CARD Act also required that penalty fees, such as late fees, be “reasonable and proportional” to the relevant violation of account terms. Today’s report found that the average late fee has declined by 20 percent since the CARD Act. Had these fees continued at their pre-CARD Act level, consumers would have paid more than $7 billion from 2011 through 2014.

Total cost of credit is roughly 2 percentage points lower than before the CARD Act: The total cost of credit includes all fees and finance charges paid by the consumer to the card issuer. Today’s report, similarly to the CFPB’s 2013 report, found that the total cost of credit is almost 2 percentage points lower than it was prior to the enactment of the CARD Act.

Available credit has increased 10 percent since 2012: Today’s report found that credit card credit is increasingly available to consumers. In total, consumers have access to nearly $3.5 trillion in credit as of early 2015. This represents an increase of nearly $325 billion—or 10 percent—since early 2012.

More than 100 million credit card accounts were opened in 2014: New account volume is growing. This growth in account volume is outpacing population growth. For the last two years, annual growth in credit card accounts has been around 3 percent. The adult population in the U.S. has grown more slowly at around 1 percent.

More than 100 million credit card accounts offer consumers free access to their credit scores: Consumers’ credit scores are one of the key determinants of whether or not they will have access to credit. Unrelated to the CARD Act, in just the last few years, credit card issuers have responded to calls from the Bureau and other parts of the federal government to make their customers’ credit scores available. As of late this year, more than 100 million accounts now offer free access to the accountholder’s credit scores.

Today’s report on the consumer credit card market can be found at: https://files.consumerfinance.gov/f/201512_cfpb_report-the-consumer-credit-card-market.pdf