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Prior to the CARD Act of 2009 credit card issuers did not have to be clear about the fees and penalties that may be associated with a credit card. The legalese used for most of the contracts and consumer information packets mailed to card holders read as much like a foreign language as they did English, confusing consumers. This intentional misinformation allowed issuers to collect exorbitant fees and and prevented consumers from knowing how to avoid them. According to a recent Consumer Financial Protection Bureau(CFPB) report, that trend has changed in many ways that favor consumers.

The Findings

According to the findings published in the report, consumers paid nearly $5 billion less in fees in the last quarter of 2012 when compared to the same period of 2008, just prior to the CARD Act. The savings came in these areas:

  • The act required penalties to be ”reasonable and proportionate” resulting in late fees that are an average of $6 less per late payment.
  • Bills must be due on the same day of the month, resulting a fewer late fees being assessed. Late fees can not be assessed until a consumer is 21 days late, again, resulting in fewer late fees being assessed. These two regulations on late fees saved consumers a combined $1.5 billion.
  • The CARD Act regulated over the limit fees by requiring that a consumer must ”opt in” in order to charge any amount over their limit. Previously, most issuers had allowed a person to charge over their limit to a small extent and then charged a fee of $35 or more for the privilege. The regulation has nearly eliminated over the limit fees, saving Americans $2.5 billion.
  • The CARD Act limited hidden fees and changes in interest rates.
  • After the Card Act, credit card contracts have shrunk by more than 2,000 words, making them much more easy to understand.

CFPB Director Richard Cordray had this to say about the findings:

”We saw firsthand how hard people were struggling to stay afloat. Particularly with respect to credit cards, people were extremely frustrated, and they were complaining loudly and frequently about being dinged by unexpected fees and about dealing with card agreements full of fine print and legalese they could not decipher or understand. Based on the information we have available to review changes in the credit card market, the act eliminated many unfair fees, made some market practices more transparent, paved the way for easier comparison shopping, and created a market where consumers can see the costs upfront. These changes are critical to strengthening consumer protections in the marketplace and helping us rebuild our economy.”

One unfortunate result of the act has been a general rise in credit card interest rates, most likely as a way to keep profit margins at acceptable levels. Despite higher interest rates, the elimination or regulation of fees allows many people to pay down their credit card debt more easily.


About the author: Jerry Coffey


Jerry Coffey spent many years in a debt-riddled gray area somewhere between broke and desperately broke. His seemingly endless need for more and more cash led him to payday loans, repossessions, bankruptcy, and depression. After years of the same financial style, he heard a piece of advice that inspired him to find a way to change. The advice: ''The very definition of a fool is someone who continues to do the same things, but expects different results.'' This led him to a much more frugal lifestyle that sees all of his bills paid on time and a growing savings account. Even the seed of a retirement account has begun to sprout.


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