Most of us remember the last Great Depression. Millions of people lost jobs, homes and tons of money that they had been saving for years. And let’s be honest here – none of us would ever want to go through that sort of financial crisis again. However, it is possible for some good things to come out of the worst types of financial scenarios. Take, for example, some credit card regulations that were put into effect shortly after the last recession. These new rules saved credit card account holders over $16 billion in fees, according to the Consumer Financial Protection Bureau.
Exactly what rules? For starters, the CARD Act went into effect shortly after the recession and had to do with late payment charges. Prior to the act, the average late payment fee was right around $35. Now that the CARD Act is enforced, those late fees have dropped on average to about $27. This act also allowed easier methods for consumers to get their credit card payments in on time. For example, card issuers are no longer allowed to require payments prior to 5:00 pm on the day the bills are due. Credit Card holders are now obligated to get their billing statements a full three weeks prior to payments being due. Late fees must be appropriate and reasonable. The CFBP claims that this act has saved consumers $7 billion dollars.
Another big drop came in the form of over-limit fees being greatly reduced. These fees used to average about $35, and were tacked onto consumers’ bills when they went over their credit limits. The CARD Act made some changes to how/when these fees could be levied against cardholders. Companies that issue credit cards are now required to get customer agreement and the fees have to be “reasonable.”
According the CFPB, these new rules, “… were enough to severely restrict the practice of charging over-the-limit fees.” If these fees were still being charged like they were prior to the CARD Act, they would have likely cost credit card account holders roughly $9 billion.
An additional practice that the CARD Act has almost done away with is credit card companies increasing the interest rates on credit cards, including existing balances that consumers were already paying on, “…independent of any particular triggering action by the consumer,” according to official CFPB representatives. Some experts believe that these types of changes could wind up happening across entire sectors of banks’ credit card portfolios. However, the law restricted these hikes to interest rates and laid out clear guidelines as to when they could take place. In fact, by 2012 just 1.5 percent of credit card accounts were subject to increased interest rate hikes.
According to an official report from the folks at the CFPB, “The repricing rate remains very significantly below any pre-CARD Act baseline we have been able to establish, which suggests—while not conclusively proving—that the Act’s restrictions continue to discourage repricing activity.”
Our typical readers are not big fans of the Consumer Financial Protection Bureau, and neither are we. However, it is nice to learn from the bureau about how the CARD Act has managed to allow millions of consumers to save billions of dollars. Of course, it would be great if credit card companies would be more proactive about finding methods to make using their products more affordable. As to whether that will happen any time in the near future, however, is anybody’s guess.
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