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 by the Center for Responsible Lending finds.
The report, "Credit Card Clarity: CARD Act Reform Works," also finds that—contrary to industry claims—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. [For the full report, go to http://qa.crl.w.lmdagency.net/research-publication/credit-card-clarity.]
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.
Since February 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."
Those who would derail financial reform argue that rules and oversight inevitably lead to significant and negative "unintended consequences" for consumers. To the contrary, the housing market crisis is an example of the harm an absence of common-sense rules brings. This report shows that, prior to the CARD Act, the credit card industry was another.
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