Published May 17, 2011
Credit card interest rates have held steady, penalties are less costly for consumers and annual fees and other charges have changed little over the past year, according to a study released Tuesday by the Pew Safe Credit Cards Project.
"The products are safer and more transparent than they were before," says Nick Bourke, director of the nonprofit project that has tracked credit card terms, including interest rates and fees, since 2008. Pew's report was released just ahead of the two-year anniversary of landmark credit card reforms signed into law May 22, 2009, by President Obama. Bourke says Pew researchers want to know how the Credit CARD Act of 2009 has impacted consumers and if it is doing what lawmakers intended.
Among other things, the law eliminated surprise interest rate hikes, capped late fees and banned billing and payment practices deemed unfair and deceptive by federal regulators and consumer groups. Although the law was enacted nearly two years ago, the bulk of the major consumer protections did not take effect until Feb. 22, 2010. (See CARD Act time line).
300 cards examined
Pew examined terms and fees for more than 300 credit cards issued by the top 12 banks and top 12 credit unions. Together, these lenders account for more than 90 percent of all outstanding credit card balances. The data is current as of January 2011 and compares that data to rates and terms advertised in credit card solicitations from March 2010. The study compared:
Bourke said that while some industry observers and banking lobbyists had predicted that the law would cause everyone's interest rates to spike and reinstate annual fees on accounts, those outcomes have not happened. "Only one in five credit cards include an annual fee, and the size of that fee has barely moved," Bourke notes. Advertised interest rates went up in the months following enactment of the law as banks and credit unions tried to assess the impact the regulations would have on their business models. However, rates have held steady in the past year. (The CreditCards.com Weekly Credit Card Rate Report has shown this as well, with rates being largely static for most of 2011.) As for those dire predictions, "So far, that has not panned out," Bourke says.
"What we are concluding from this is the credit card market really has stabilized," Bourke says. "The Credit CARD Act was very effective at changing the practices that it targeted while not shutting the credit card market down or causing serious changes."
The Pew results mirror those of other recent studies showing more transparent, consumer-friendly credit cards since the law took effect. The only official government assessment of the law's impact was released in February 2011 by the Consumer Financial Protection Bureau. That report noted that credit card terms had improved, and the new law had helped consumers, but confusion over complex terms still lingered. In its annual report on consumer complaints, the Federal Trade Commission reported that complaints about credit cards dropped 26 percent between 2009 and 2010.
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