Credit Card Reform Worked: Prices Not Increased, Just Clearer

Ignore all the haters. Credit card reform in 2009 did its job, making credit cards less confusing and safer for consumers. According to a new study from the Center for Responsible Lending, contrary to popular misconception, the reforms didn’t increase prices for credit cards, it just made the real costs clearer. Banks couldn’t tuck costs in hidden fees and sneaky practices, they had to put them on the sign out front.

The report looked at several sets of data:

* Stated vs actual credit card rates – moved closer together after CARD Act passed.
* Bank filings with regulators showed prices became more transparent
* Junk mail pitches for credit cards, after you factored out the effect of the recession, actually remained the same or even rose
* Rates on all credit cards vs those on business credit cards, which are not governed by the CARD act. Effective rates rose on business cards compared to consumer credit cards.

Here’s the executive summary (PDF). Here’s the full report (PDF).

“People mistake higher rates on mail solicitations and other offers in the last year as a price hike,” said Center for Responsible Lending 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.”


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