About: This video details changes to the credit card industry. The Credit Card Accountability Responsibility and Disclosure Act of 2009 or Credit CARD Act of 2009 is a federal statute passed by the United States Congress and signed by President Barack Obama on May 22, 2009. It is comprehensive credit card reform legislation that aims “…to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan, and for other purposes.” The bill was passed with bipartisan support by both the House of Representatives and the Senate.
Criticism: The act was not expected to affect existing credit card contracts. However, the act that was passed applies to contracts made in the past by setting an effective date of February 22, 2010, which gave banks time to prepare and notify their customers. The Consumer Financial Protection Bureau in its October 2013 report on the CARD Act found that between the first quarter of 2009 and December 2013, credit card interest rates increased on average from 16.2% to 18.5%, while the “total cost of credit,” that is, the total of all fees and interest paid by all consumers as a percentage of the average cycle-ending balance, decreased by two hundred basis points. The CFPB made no judgment on the extent to which the CARD Act contributed to these increases and decreases. However, interest rates on other types of consumer credit increased. The CFPB in its study also found that consumers paid less in late payment and over-the-limit fees since passage of the CARD Act. In contrast, studies by CardHub.com and the Center for Responsible Lending argued that interest rate trends were the result of economic pressures typical of a recession and not the law. According to these studies, historical economic data shows that the interest rate increase and decline in available credit seen during the Great Recession should have been worse considering the widespread unemployment, credit card delinquency and credit card charge-offs.