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The Credit Card Accountability Responsibility and Disclosure Act of 2009 made sweeping reforms to the credit card industry. It is why you now know exactly how long it will take to pay off your balance if you only make minimum payments, and it is why marketers hawking student credit cards have largely disappeared from college campuses.
According to a recent government report, it may also be linked to declining fees, increasing interest rates and overall increased transparency on the true cost of credit cards.
Fees down, interest rates up
The Consumer Financial Protection Bureau largely hailed the CARD Act as a success, although it noted more can be done to address credit card costs.
"The CARD Act brought better consumer protections and fairness to the marketplace, but we found there is more work to be done," CFPB Director Richard Cordray said in a written statement.
Still, the bureau says the act has been a success on many fronts, particularly when it comes to reining in two types of credit card fees:
- Overlimit fees: The law requires consumers opt-in to the practice of allowing them to spend more than their pre-approved limit. The option eliminates the embarrassing possibility of a card being declined, but over-the-limit charges typically come with hefty fees attached. Most consumers have chosen to remain opted-out, which has meant card issuers collected $2.5 billion less in overlimit fees last year than they did in 2008.
- Late fees: Since the implementation of the CARD Act, late fees have declined an average of $6. The dropping fees may be attributed to a requirement in the law that late fees be "reasonable and proportional." In 2012, consumers paid $1.5 billion less in late fees than they had prior to the law.
While fees have dropped, some consumers may have noticed the rate on their low-interest cards have been creeping up. The CFPB report acknowledges some interest rate creep may have been the result of companies trying to offset lowered fees, but the bureau also points out other factors, such as the Great Recession, which may have contributed to rising APRs.
Despite rising interest rates, the overall cost of credit cards has dropped since the CARD Act took effect. The CFPB notes the cost of credit dropped two percent from 2008 to 2012.
Application fees, add-on products up next for review
Looking forward, the CFPB says it intends to look at some of the other ways credit card companies are making money off their customers. In a press release, it outlined the following areas of concern it plans to review:
- Application fees
- Add-on products such as identity theft protection and credit monitoring
- Deferred-interest products such as purchases advertised with interest free financing but that retroactively apply interest charges if not paid off within a certain time period
In addition, the bureau intends to take a closer look at disclosures for rewards credit cards and grace periods. It will also review how card issuers provide disclosures to those who manage their accounts online.
The CFPB seems to be on the case when it comes to protecting consumers from exorbitant fees and misleading business practices, but don't count on the feds to do all the work. Be sure to read your statements carefully and shop around to find the best credit cards for your wallet.