New credit card rules mandated by the Credit CARD Act of 2009 have resulted in significantly greater price transparency for consumers, a new research report from the Center for Responsible Lending finds.
The report, "Credit Card Clarity: CARD Act Reform Works," also finds that the price consumers pay for credit cards has remained stable and access to credit has not tightened beyond what would be expected from the economic downturn. According to the organization, CARD Act reforms have helped reverse years of increasingly unclear pricing that misled consumers into believing they would pay less for credit card debt than was actually true, the report finds. Inaccurate pricing likely caused many borrowers to take on more credit card debt than they otherwise would have.
But The Wall Street Journalnotes during congressional debate on the credit-card bill, banking groups such as the American Bankers Association (ABA) argued that the proposal would result in a significant pull-back in credit while also increasing the cost of credit.
The ABA now says that while the CARD Act has helped lead to greater price transparency for consumers, the reality is less credit and higher prices for a number of Americans.
"We think the real story is that the number of new accounts is dramatically down and a significant number of working Americans are being edged out of the marketplace or facing higher rates and tougher credit terms," said Kenneth Clayton, ABA's senior vice president and general counsel for card policy. "It's impossible to say at this time whether that's a result of the CARD Act, the economy, or a bit of both."
The Center for Responsible Lending claims to have “protected homeownership and family wealth by working to eliminate abusive financial practices” since its founding in 2002.
“Since Feb. 22, 2010−when most CARD Act reforms took effect−stated rates have moved closer to actual rates, which have remained steady,” the study finds. “Now, more than $12 billion in once obscure charges are stated more clearly in credit card offers. Transparency breeds competition, which lowers price long term.”
"People mistake higher rates on mail solicitations and other offers in the last year as a price hike," said CRL senior researcher Josh Frank, author of the report. "But the facts show that offers now just more closely match actual costs. Prices have been level, but borrowers have a much better picture of what those prices are."