By Nancy Wilberg Ricks, Senior Policy Communications Strategist, Wealth-Building Policy Project
Despite only being in operation for two years, the Consumer Financial Protection Bureau (CFPB) is already making a difference for Latino consumers, and we’re learning more about its benefits all the time. In a new report, the CFPB announced that the implementation of the CARD Act of 2009 has largely been a success in reducing the costs of credit for ordinary Americans.
In the wake of the financial crisis, the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 was created to rein in deceptive and unfair practices in the credit card market. After the law was passed by a bipartisan congressional vote, the CFPB assumed responsibility of implementing the law.
This law couldn’t have come soon enough for the at least 70 percent of American adults who have a credit card. Prior to the CARD Act, 18-year-olds were bombarded with misleading offers for credit cards they couldn’t afford, credit limits were often increased automatically without consulting consumers, and late and “over-limit” fees were exorbitant and damaging.
Fortunately, the CFPB recently announced that many of these practices are now either in decline or eliminated entirely. In addition, the agency reported that the overall cost of credit decreased by 2 percent between 2008 and 2012 in a promising sign for credit card holders.According to the report, late-fee amounts have significantly decreased by an average of $6 per fee. This is no small difference as this alone resulted in a $1.5 billion decrease in late fees spent across the economy!
In a new provision, consumers must now ask credit card companies to raise their credit limits themselves, which has resulted in fewer credit increases. This has freed up the credit available to others who may need it and has kept responsible access to credit a reality for consumers.
Finally, the CFPB is making “over-limit” fees—charged for each transaction occurring after hitting your credit limit—a thing of the past. The CARD Act effectively eliminated such fees by making it harder to go over your credit limit, requiring that consumers “opt in” before being allowed to exceed their credit limit. The CFPB estimated that consumers paid $2.5 billion less in such fees than they did in 2008.
With millions of Latinos still struggling to recover after the Great Recession, these findings are welcome and effective protections. Latinos and all Americans deserve a fair credit card market where consumer rights are not overshadowed by industry profit. The CARD Act guarantees that consumers have a better chance at financial success without being overburdened by needless fees. Want more information on what the CFPB is and how it works for you? Check out NCLR’s Consumer Protections page now!