Are CARD Act Critics in Complete Denial? (cont.)
Here comes a study by the Center for Responsible Lending saying that maybe reports of the demise of the American credit card holder might just be a tad premature.
According to the Wall Street Journal, the CRL says, “This report’s findings refute claims by the credit-card industry that the new credit card rules have restricted access to consumer credit and raised its costs.” Significant transparency has been achieved while access has not been denied and costs have not skyrocketed.
Our own Christopher Maag blogs that, according to the CRL Report in 2007 and 2008, confusing, complex pricing that obfuscated true rates and fees – as well as the ever widening gap between rates presented in credit card solicitations and those actually paid by cardholders (approximately 2.3%) – cost consumers $16.3 billion more than they expected. However, after enactment of the law, the gap between advertised and actual rates dropped to .2%. As a result, the difference between what people thought they were being charged and what they were actually charged shrunk by more than $12 billion, according to Josh Frank, CRL senior researcher and author of the report. No doubt some serious clams, but a lot less fishy, yes?
[Related Article: Study: CARD Act Sheds Light on $12B in Hidden Fees]
As we troll for the truth, let’s also look at another prediction versus reality. Maag quotes an August 24, 2010 Wall Street Journal editorial, to wit:
“It was among our safest predictions that reduced credit to consumers would result” from passage of the Act. “By limiting the ability of banks to increase rates on delinquent borrowers and to charge fees on unprofitable customers, Washington encouraged card issuers to be more selective in advancing credit and to demand higher rates when they do.”
Maag reminds his readers that “when adjusted to factor in the effects of the recession, data from the Federal Reserve Board shows that interest rates held steady after passage of the Act.” And, “The ratio of American families receiving credit card solicitations in the mail actually increased after the act passed, from 40% in 2009 to 60% recently, according to mail volume data from Mintel Comperemedia.”
Do I see a slight blush on the faces of the Murdoch marauders?
According to the Journal, “a study CardHub.com released this week finds that high credit-card interest rates over the past few months have been the result of the economic environment, not the CARD Act.”
Are those at the American Bankers Association, who came to scoff, remaining to pray? Well, not exactly.
As per the Journal:
Still, the ABA, says that while the CARD Act has helped lead to greater price transparency for consumers, the reality is less credit and higher prices for a number of Americans.
“We think the real story is that the number of new accounts is dramatically down and a significant number of working Americans are being edged out of the marketplace or facing higher rates and tougher credit terms,” said Kenneth Clayton, ABA’s senior vice president and general counsel for card policy. “It’s impossible to say at this time whether that’s a result of the CARD Act, the economy, or a bit of both.”
What do you think? Are they banging on the facts, banging on the law, or banging on the table?
Image by Josh Kenzer, via Flickr