Time for a checkup: How is credit card reform working out?

In 2009, President Barack Obama signed into law the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act). The goal was to bring fairness and transparency to the credit card market.

Now, the Consumer Financial Protection Bureau (CFPB) wants to know if the CARD Act is doing its job -- how it has affected the daily lives of consumers and the behavior of industry. To do that, the CFPB is seeking public comment from consumers, credit card issuers, industry analysts, consumer advocates and others on the effects of the CARD Act.

"The CARD Act made major changes in the credit card marketplace in order to better protect consumers," said CFPB Director Richard Cordray. "With today's inquiry, the Bureau is seeking to understand how the credit card market is working in practice and how the CARD Act changes have affected consumers and credit card issuers."

CARD conference

In February 2011, the CFPB held a conference to assess the CARD Act's impact on the marketplace one year after many of the Act's provisions took effect. It found that the Act had largely curtailed the long-standing practice of hiking interest rates on existing cardholder accounts -- prior to the CARD Act, credit card companies often raised customers' interest rates with little or no advance warning. The conference also found that the CARD Act had substantially reduced consumer late fees and nearly eliminated overlimit fees.

Now, the agency is seeking to gather more information on the effects of this law as of today. The CARD Act requires that the CFPB conduct a review of the consumer credit market. As part of that review, the Bureau is seeking public comment from consumers, credit card issuers, industry analysts, consumer advocates, and others on the effects of the CARD Act.

Areas of inquiry

Some of the specific areas the agency is requesting information on include:

1. The terms of credit card agreements and practices of credit card issuers: The bureau wants to know how the terms and conditions of credit card agreements may have changed since the CARD Act went into effect and how effective disclosures of rates, fees, and other cost terms of credit card accounts have been. The CFPB is looking to see how card issuers may have changed their pricing, marketing, underwriting, or other practices in the wake of the CARD Act and whether or not those changes have benefited or harmed consumers.
2. The success of protections against unfair or deceptive acts or practices: The CFPB is looking for information on the extent to which unfair or deceptive acts and practices still exist in the credit card market and whether issuers have circumvented -- or tried to circumvent -- any CARD Act protections against unfair or deceptive acts or practices.
3. Changes in the cost and availability of credit: The bureau is evaluating how the cost and availability of credit has changed since the CARD Act, and will consider the extent to which the upfront interest rate, and all-in cost of credit has changed when controlled for risk.
4. The use of risk-based pricing: The CFPB is considering the changes in the incidence of risk-based pricing in the credit card market, including the adoption of alternative practices in the wake of rules that restrict account repricing.

The review will culminate in a publicly available report to Congress on the state of the consumer credit card market. The data gathered will be used in determining future policy decisions.