As U.S. News and World Report identified, this week marks the five-year anniversary of the Credit Cardholders Bill of Rights (aka the CARD Act) being passed. So, some time should be taken to assess how well this legislation has lived up to expectations. The CARD Act had two primary objectives. One was to prevent unfair practices, and the other was to make credit card rates and fees more transparent. Despite resistance from credit card companies, these two objectives helped the bill get passed with bipartisan support.
While the credit card industry argued that the legislation would simply shift or increase costs for consumers, the act did change the credit card marketplace that ultimately saved consumers quite a bit of money. A report by the Consumer Financial Protection Bureau (CFPB) showed the CARD Act’s provisions that limit penalty fees have saved consumers $4 billion on an annual basis. Furthermore, the report revealed that the overall cost of credit has fallen by approximately 2%.
In addition to the work done by the CFPB, a university study offered even more dramatic results. This study found that the act’s limits on fees reduced borrowing costs to consumers overall by 1.7% per year, and people with credit scores less than 660 experienced a 5.5% reduction in borrowing costs. In total, the study indicated the act had a greater impact than the CFPB report described. By analyzing fee reductions resulting from the CARD Act, the university study found that the act saved consumers $12.6 billion per year. Consequently, the CARD Act seems to have done pretty well in helping consumers.