It’s been four years since lawmakers passed the CARD Act, a massive set of reforms for the credit card industry. As a result, consumers have saved billions in fees and other charges, but access to credit has also become more difficult for some people.

According to a newly released report [PDF] from the Consumer Financial Protection Bureau, which assumed authority of enforcing the CARD Act in 2011, consumers saved a total of $4 billion in 2012 over what they would have paid had card companies continued to charge what they did before the Act.

The CFPB calculates that American credit cardholders would have paid $2.5 billion more in overlimit fees in 2012 had the CARD Act — which requires that cardholders opt-in to overlimit fees, rather than that being the default — not been enacted, while consumers saved around $1.5 billion in late fees, with the average late fee dropping by $6 in the years since the law kicked in.

The agency admits it’s difficult to pin down exactly how much of this change is a direct result of the legislation. If consumers are being more responsible by not overextending their credit and by paying their credit card bills on time, that would explain some of the savings. On the other hand, it’s possible that credit card issuers would have increased their overlimit and late fees to account for this more responsible behavior.

“This report confirms the law is making a big difference in protecting people from some of the worst industry practices,” says Pamela Banks, senior policy counsel for Consumers Union. “Penalty fees are down, and your bill provides better information about the true cost of your credit. There are still issues in the marketplace that need serious attention, but this report shows we’ve made a lot of progress in a relatively short period of time.”

LIMITED ACCESS FOR SOME
One double-edged issue is the availability of credit to subprime and young borrowers. CFPB notes that there has been a “substantial decrease in the number of credit card accounts originated among students and other consumers under the age of 21,” and that “a small but discernible percentage of applicants… deemed otherwise creditworthy are being declined as a result of insufficient income to satisfy the Act’s ability-to-pay requirement.”

While this can be seen as a positive indicator, in that these two groups — younger and subprime consumers — have a higher percentage of people who aren’t able or prepared to take on the responsibility of paying off a credit card. Thus, less access to credit for them means fewer opportunities for them to get into a hole financially.

The drop in student credit cardholders is likely attributable to new regulations limiting the on-campus and direct marketing of credit cards to people under the age of 21. As anyone who has been on a college campus during orientation knows, credit card companies used to circle like vultures, handing out all manner of freebies just for filling in an application. The CARD Act has helped to curb such practices.

Credit card companies used to wrangle these groups in with small-limit cards from which the issuers could make money on huge overlimit and late fees; these are now limited by the CARD Act. The issuers would also keep increasing credit limits on these cards, encouraging cardholders to keep spending, but the CARD Act requires that consumers make the request for limit increases, which most people won’t do. Thus, card issuers no longer see students and subprime consumers as pots of gold.

What concerns me is that these groups are becoming a prime target for predatory lenders in the payday and auto-title loan industries. Someone who is on the bubble for approval — or a student who assumes he won’t be approved — for a credit card may see the short-term, high-interest option as an easier way to get money quickly. Unfortunately, as the CFPB itself has shown, payday lending, with its triple-digit interest rates, often results in the borrower taking on significantly more debt than initially expected.

LINGERING CONCERNS
In its report, the CFPB outlines numerous remaining concerns that may need to be dealt with by future regulations.

First up is add-on products like ID theft protection and credit monitoring services. “The Bureau has found through its supervisory work that these products are frequently sold in a manner that harms consumers,” states the report.

Then there are “fee harvester” cards, which skirt CARD Act regulations by charging massive upfront fees — sometimes more than 25% of a card’s initial credit limit — before the cardholder is technically a customer. Thus, these fees do not fall under the umbrella of the legislation. CFPB says it “will continue to monitor the use of application fees in connection with account opening to determine if it should take action under its available authorities.”

The agency also expressed concern about deferred-interest programs. Distinct from promotions that charge low or no interest on purchases made during an introductory period, deferred-interest cards will retroactively charge interest on purchases if the balance is not paid 100% in full by the end of that intro period. These promotions are primarily tied to store-branded credit offerings.

“We have serious concerns about deferred interest credit cards,” explains Christina Tetreault, staff attorney for Consumers Union. “Some people turn to these cards to cover the cost of big-ticket items, but the terms can be incredibly complicated, and you can wind up getting hit with huge, surprise penalties. We’re pleased to see the CFPB call out these products, and we’re glad that the bureau is going to take a hard look at the risks and benefits.”

CLEAR AS MUD
The CFPB also wants to keep investigating several issues involving transparency. For example, the CARD Act requires that certain disclosures — including warnings related to late fees and the cost of making only the minimum payment due — be included on monthly billing statements, but many cardholders now make their payments via online portals that don’t include these disclosures.

Another transparency issue involves rewards products. Consumers often use competing rewards programs as a deciding factor in picking a particular credit card, but they don’t always understand the full terms and conditions tied to earning and using those rewards. Thus, the Bureau “will review whether rewards
disclosures are being made in a clear and transparent manner, as well as assess whether additional action is warranted.”

Do you know exactly how your grace period works when paying your credit card bill? You might think you do, but it’s possible you’re mistaken, as it’s often more complicated than a simple pay-by date.

“It is unclear whether consumers understand that once they carry a balance into a new month, interest will be assessed on the unpaid balance from the start of the prior month,” writes the CFPB. “Until the consumer qualifies for the grace period again, interest is assessed on all purchases from the date of purchase. It is likewise unclear whether consumers understand that even after they pay the full amount shown on their bill, they may still owe ‘trailing interest’ for the period from the time the bill was issued until the time the payment was received.”

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