Consumer Credit Card Protection Act

The CARD Act may have unintended consequences for consumers.

President Barack Obama signed the Credit Card Accountability, Responsibility and Disclosure (CARD) Act on May 22, 2009. At the time, a White House press release called prevailing credit card agreements "deceptively complicated." Still, some consumer advocates and analysts assert the act set off unintended consequences that will ultimately harm consumers.

Credit Card Rates

Among other things, the CARD Act is intended to eliminate credit card rate increases deemed unfair to consumers. For example, it disallows most rate increases on existing balances and limits retroactively raising rates as a penalty for late payments.

Due Dates

The act placed restrictions on late fees partly by requiring creditors to give credit card customers at least 21 days from the time of mailing a statement to make the required payment. It also bans due dates that change monthly as well as midday payment deadlines.

Credit Terms

Creditors also must provide clear credit terms to consumers. That includes issuing statements that indicate how long it will take to pay off a balance with interest if just the minimum payment is made each month.

Industry Response

Despite intended efforts to protect consumers, some consumer advocates have questioned the CARD Act's effectiveness. That's because some creditors have raised interest rates, late-payment fees and other rates in response to new restrictions imposed upon the industry.

Purchasing Power

Some industry analysts also foresee a potential reduction in purchasing power for consumers who have less-than-perfect credit. They anticipate creditors will be less likely to risk extending credit to those consumers due to the CARD Act's restrictions on fees charged for defaults.

References

• Federal Reserve: New Credit Card Rules Effective Feb. 22
• White House Fact Sheet: Reforms to Protect American Credit Card Holders
• Seeking Alpha: Credit Card Act of 2009: Thanks for Nothing, Congress
• Fox Business: Credit Card Fees Rising? Consumer 'Protection' Act May Be to Blame
• Bloomberg: Credit-Card Consumer Protection Law May Reduce Purchasing Power