Credit Cards

Are CARD Act Critics in Complete Denial?

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In law school, I was taught – as are all aspiring lawyers – to perfect the art of arguing any and/or all sides of a case. The lawyer’s mantra – “If you can’t beat on the facts, beat on the law. If you can’t beat on the law, beat on the facts. If you can’t beat on either the facts or the law, beat on the table.”

The American Bankers Association has been a vociferous critic of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act).  According to a recent article in the Wall Street Journal, “During congressional debate on the credit-card bill, banking groups such as the American Bankers Association, or ABA, argued the proposal would result in a significant pull-back in credit while increasing the cost of credit.”  To wit, the unintended consequences of this legislative effort would condemn consumers to wander for eternity through a credit desert.

[Consumer Guide: How the Credit CARD Act of 2009 Affects You]

The Act was one of a series of laws passed to compel institutional accountability by injecting greater transparency, fairness and sanity into a system replete with A.D.D. terms and conditions, incomprehensible legalese rivaling the phraseology of Lewis Carol’s Cheshire cat and voluminous contracts that made Charles Dickens’ “A Tale of Two Cities” look like a short story. Five years of irresponsible borrowing, lending and spending had hurtled borrowers down a rabbit hole where first none were left behind, then none left standing, finally ending as those who had clawed their way to the surface were being unceremoniously flung back into the credit vortex. Trillions lost, millions of homes foreclosed and accounts closed, credit limits slashed, credit scores trashed, interest rates and fees flying to and fro.

The final major piece of the tri-parte CARD Act regulatory puzzle was implemented by the Federal Reserve last August.  The newly minted Consumer Financial Protection Bureau – created by the Dodd-Frank Act – will assume enforcement of the CARD Act beginning July 21st of this year. As part of its preparations, the CFPB is holding a conference on February 22nd to evaluate whether we are looking at a light at the end of a long, dark, winding tunnel – or the headlamp of the oncoming economic death train our fine financial services friends have warned us about.

[Related Article: Holly Petraeus, Military Family Watchdog Slated for Consumer Protection Agency Post]

We know that banks have engaged in a creative fee frenzy since the CARD Act imposed greater disclosure requirements and longer waiting periods, and restricted their ability to raise or create new rates and fees. Supposedly the storm clouds had gathered, the war party was painted in full battle regalia, dancing around the bonfire, the charge down the hill was imminent and then…

Are CARD Act Critics in Complete Denial? (cont.) »

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  • http://businessworkingcapitalloans.com Neal Coxworth

    I think the CARD Act has been tremendous success. Its too bad it took the utter devastation of the US economy to spur our complicit legislators to action. The ABA will always chirp endlessly about any attempt to limit banking profits with spin and obfuscation. That’s what lobbyists are paid to do. Oone only has to look at a statement from their credit card company to realize how much more straightforward it is.

    As for banks giving up on credit cards? Please……there is still a bank for every consumer that will issue them a card. Why? The interest spread is phenomenal, especially for the big guys. The fact that the government took a few hundred basis points away from them via legislation makes them cry foul, but that will never pull them away from the “honey hole” of high rate, unsecured consumer debt.

  • Lauren

    Your omitting a very real fact that interest rates increased dramatically, for months preceding the CARD act, because banks knew that they would be limited in making increases later. So yes, there is greater transparency, but people are paying more. They are just more knowledgeable about what they are paying up front. Also, those with damaged credit, are getting secured credit cards, where they have to pay the full amount of their credit line up front.

    So is it working? Well, yes, from the standpoint of greater transparency. But rates have gone up dramatically preceding the CARD act, and it is more difficult for those with bad credit to get an unsecured credit line. So, you be the judge — is it working for you?

  • Pingback: Deregulators Trying to Destroy the Economy? | ELU 24

  • Abin Clane@Private Student Loan

    Great article about credit card debt. According to recent reports, the Card Act is working pretty well. This is of course for the benefit of most consumers and I do hope it will stay this way.

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