Even as the Credit CARD Act was passed in 2009, some worried what it might mean for Americans with lower credit scores and incomes, according to a report in the Wall Street Journal. Part of the problem was that the law came as the country was entrenched in a deep recession, and lenders made a greater effort to protect themselves from the inevitable losses to defaults and delinquency by increasing lending standards.
But these consumers also ran afoul of lenders because they experienced money problems and could no longer pay their bills, effectively locking themselves out of the lending system, the report said. This has led them to seek alternative lines of credit, including payday loans which can cause even greater financial problems.
Further, many banks eliminated a number of services low-income consumers used regularly, including free checking accounts, to recover losses from other regulations, the report said. Because of these cost-cutting measures, many poorer Americans are now under- or even unbanked.
Low-income consumers who can’t qualify for a credit card have increasingly turned to prepaid cards in recent months.