Credit card law gets high marks after a year

“As a result of the CARD Act, consumers now have better information about how much they’re paying for credit and how much they might save on interest if they pay down their balances more quickly than they might otherwise have planned.”

During a Tuesday conference, said while the industry has made overall positive changes, more work is needed. 

“I believe the CARD Act has pushed in the right direction,” she said. 

“Our new consumer bureau will make clarity a top priority,” she said of the CFPB, which will oversee the law beginning this summer. “

Industry representatives have expressed their willingness to help, and many consumer groups and academics are committed to helping as well. We want to work collaboratively with all parties.”

A recent study by CardHub.com, which tracks the credit card market, shows that higher interest rates observed in the last few months were the result of the economic environment, and not CARD Act. 

CardHub’s study also found the year-old law didn’t affect banks’ ability to charge consumers whatever interest rates they want, instead, it simply prevented banks from being able to use a “bait and switch” tactic.

“While it is still too early to accurately gauge the full impact, it is clear the Act has ushered in a new era of empowerment for credit card customers,” said Kenneth Clayton, senior vice president and chief counsel of the American Bankers Association, after a meeting Tuesday at CFPB. “Improvements to transparency and increased protections against interest rates and certain fees have given consumers greater control over their credit card accounts.”

But Clayton expressed concern that the law has had negative effects. 

“It is also clear, however, that these benefits have not come without trade-offs, including a reduction in available credit for many consumers and increased prices,” he said. “Recent data indicates that the cost of credit and its availability have been negatively impacted by the Act, particularly for working-class Americans, many of whom have been edged out of the marketplace or are facing higher upfront rates and tougher credit terms.” 

But the CardHub.com study noted there were higher interest rate margins in the early 1990s than have been seen in the months following the CARD Act. 

“The fact that there were higher margins in an economic environment that was less severe points to the fact that it is the current economic environment and not the CARD Act driving recent interest rate margins,” the report said. 

CardHub.com said it built a statistical model that explained 84 percent of the observed changes in the margin for the time period between 1991 and 2008. 

“When we applied this model, based solely on underlying economic factors, to recent months, it predicted much higher margins than we have actually observed,” the report said.